Does the Corruption Perceptions Index Predict the Outcome of Competitions? Evidence from a Natural Experiment around the World

http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2479747

In this paper we study the effect of the corruption, as measured by the Corruption Perceptions Index (CPI), on the probability of determining the outcome in real competitive settings, where all agents in all countries are faced with exactly the same task under fixed and known rules. To that end we utilize data from soccer matches between a team in immediate danger of being relegated to a lower division and a team not affected by the results in the respective match. Based on analysis of a similar situation that occurred on the last day of a season in 75 different countries during the period between 2001 and 2013, we find that the CPI significantly correlated with the probability of achieving the desired result in order to avoid relegation to a lower division. The odds are significantly higher when the country is more corrupt according to the CPI. We also find strong evidence of a significant effect of the CPI on quid pro quo behavior that takes place in the later stages of the following year. Despite the fact that the CPI is a survey-based index and its effect is not linear throughout the scale of scores, we still find a significant association between CPI level and the results of sensitive soccer matches that were previously found to be infected by corruption. Our results provide evidence that the virus of corruption, as measured by the CPI, affects the level of competition in social activities that are not necessarily directly linked to governmental activities.