One of the problems with corruption is that sometimes you get the wrong outputs,
the wrong kinds of output.
Let's compare two kinds of government projects.
The first kind of project is local, small-scale, labor-intensive.
Imagine educating children in a village.
The second kind of project is very glamorous.
It's capital-intensive.
It has a lot of hard-to-value inputs and outputs.
Imagine, for instance, government building a large dam.
With which kind of project is it easier to skim money off the top?
Well, when the inputs of the project are opaque,
when the project lacks transparency,
and when there are large expenditures running both in and out of the project,
in that case, it's probably easier to have bribery and corruption.
So what's the result of this?
A lot of governments will build too many large-scale capital projects
with hard-to-value inputs and outputs
and perhaps too few small-scale, local labor-intensive outputs,
such as educating children in a village.
And again, this is a distortion driven by corruption.
This argument comes from a paper called "Corruption"
by Shleifer and Vishny.