Measuring corruption from household income and consumption micro-data: An international perspective

Using household survey data on expenditures and incomes, we construct an objective measure of corruption in the public sector for a broad spectrum of countries. Specifically, we focus on the consumption-income gap for public sector workers relative to private sector workers to gauge the extent of hidden income (bribes) in the government. After validating our data and documenting properties of the consumption-income gap, we compare our measure with popular corruption perception indices. We find that i ) the relationship between our measure and the alternatives is nonlinear; ii ) available indices appear to be only weakly (and sometimes “wrongly”) correlated with the consumption-income gap at high frequencies; iii ) the available indices appear to have a low weight on the relative consumption-income gap in the public sector. • The paper proposes an objective measure of corruption by focusing on the consumption-income gap of public sector workers relative to private sector workers, interpreting the gap as a gauge of hidden income (bribes). • Using household survey data from a diverse set of 57 countries over the 1995-2023 period, the authors construct the first cross-country analysis of this market inference method. • The analysis finds that popular corruption perception indices do not correlate strongly with the consumption-income gap, suggesting existing indices may provide a distorted or noisy picture of actual, experienced corruption. • The consumption-income gap offers a timely, scalable, and quantifiable measure that can be used to validate existing indices, providing a valuable component for a more credible anti-corruption toolkit.