Economists have long warned about the pernicious impacts of corruption, arguing that it increases transaction costs, reduces investment incentives, and ultimately results in reduced economic growth. Political scientists, on the other hand, ever the realists, have had a much more ambivalent view of the problem. Indeed, much classic literature focusing on the Third World saw corruption as functional for political development, enabling citizens to overcome intransigent, inefficient bureaucracies while increasing loyalty to the political system. More recent research, however, points in the opposite direction toward an erosion of public support for corrupt regimes. A series of serious methodological problems has prevented the testing of these contradictory assertions about the impact of corruption. This article uses national sample survey data, with a total N of over 9,000, from four Latin American countries to test the effect of corruption experiences on belief in the legitimacy of the political system. It finds that independent of socioeconomic, demographic, and partisan identification, exposure to corruption erodes belief in the political system and reduces interpersonal trust. The evidence seems clear, at least for these four countries, that corruption carries with it important political costs.
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