We bridge the gap between the standard theory of growth and the
mostly static theory of corruption. Some public investment can be
diverted from its purpose by corrupt individuals. Voters determine
the level of public investment subject to an incentive constraint
equalizing the returns from productive and corrupt activities. We
concentrate on two exogenous institutional parameters : the
technology of corruptionā is the ease with which rent-seekers can
capture a proportion of public spending. The concentration of
political power is the extent to which rent-seekers have more
political influence than other people. One theoretical prediction
is that the effects of the two institutional parameters on income
growth and equilibrium corruption are different according to the
constraints that are binding at equilibrium. In particular, the
effect of judicial quality on growth should be stronger when
political power is concentrated. We estimate a system of equations
where both corruption and incime growth are determined
simultaneously and show that income growth is more affected by our
proxies for legal and politiccal institutions in countries where
political rights and judicial institutions respectively are
limited.