Corruption Perceptioons Index (CPI): Definition, Country Rankings

What Is the Corruption Perceptions Index (CPI)?

The term Corruption Perceptions Index (CPI) refers to an index that scores countries on the perceived levels of government corruption by country. Scores range from zero to 100, with zero indicating high levels of corruption and 100 indicating low levels. The CPI is published annually by Transparency International, an organization that seeks to stop bribery, fraud, and other forms of public sector corruption.

Transparency International launched the index in 1995. As of 2020, the index ranks 180 countries and territories, where the average score is 42 out of 100.

Understanding the Corruption Perceptions Index (CPI)

Transparency International is a global independent, nongovernmental nonprofit organization (NPO) that aims to stop corruption by promoting transparency in various sectors of society. The organization's international secretariat is located in Berlin and it has national chapters in more than 100 countries. The agency is funded through donations from governments (which make up 82% of its donors in 2020), individuals, private donors, and other organizations.

The organization conducts research, advocacy work, and undergoes various projects in its fight against corruption. In 1995, the organization created the first Corruption Perceptions Index, ranking 45 countries based on how much corruption they were perceived to have in the public sector.

Transparency International changed its methodologies in 2012 to allow for comparisons across time, making it the baseline year. Results from previous years cannot be compared. The new method involves the selection of source data, rescaling of source data, the aggregation of rescaled data, and a statistical measure indicating the level of certainty. A quality control mechanism is also incorporated, consisting of independent data collection and calculations by two in-house researchers and two independent academic researchers.

Corruption Perceptions Index (CPI) Sources

Transparency International takes data from 13 datasets. This includes data released by:

• African Development Bank
• Asian Development Bank
• World Bank
• World Economic Forum
• Economist Intelligence Unit
• Global Insight
• Bertelsmann Foundation
• International Institute for Management Development
• The PRS Group, Inc.
• World Justice Project
• Political and Economic Risk Consultancy
• Freedom House

In order to appear in the CPI, a country must be assessed by no less than three sources. Sources must document their data collection methods and measurement approach, and Transparency International assesses the quality and adequacy of these methodologies. If data is collected via a business survey, for example, Transparency International will assess whether the survey's sample size is large enough to be representative.

Since these sources don't use a standard scale to rank their findings, Transparency International transforms scores into standardized values. This allows the organization to show how each country ranks when compared to others. This data is then used to rank countries out of a score of 100, taking the average score for each.

Economic Impact of Corruption

Corruption continues to be a big hurdle to political, economic, and social development. Those who are economically challenged are the most affected by the effects of corruption and related fraud. That's because they often rely heavily on public services and can't afford to pay bribes. The International Finance Corporation also cites increases in the cost of business as a result of corruption.

According to a publishing in 2002 in the Journal of Business Ethics, countries and territories that have low CPI rankings (and therefore high corruption) also have what the study authors called an overabundance of regulation and a thriving black market. Countries or territories with a high real gross domestic product per capita (RGDP/Cap) also had a high CPI ranking (and therefore low levels of corruption).

Studies published in 2007 and 2008 in The European Physical Journal found that countries and territories with higher CPI rankings were more likely to experience more long-term economic growth and that they experienced GDP increases of 1.7% for every point added to their CPI score. The higher a country or territory’s CPI ranking, the higher that state’s rates of foreign investment. Therefore, corruption has been found to have a negative impact on a nation or territory’s economy.

Corruption Perceptions Index (CPI) Rankings

The organization released its findings for the CPI for 2020, which ranked a total of 180 countries. As mentioned above, the index ranks countries from zero (highly corrupt) to 100 (clean). Here are some of the key findings from the report:

• Two-thirds of the countries on the list scored below 50/100 while the average score was 43/100
• Western Europe and the European Union (EU) ranked the highest with a score of 66/100
• Sub-Saharan Africa was the lowest region with a score of 32/100
• The top five countries were Denmark (88), New Zealand (88), Finland (85), Singapore (85), and Sweden (85)
• The lowest five countries were Venezuela (15), Yemen (15), Syria (14), Somalia (12), and South Sudan (12)

The report also found that 26 countries improved and ranked higher, including Greece, Myanmar, and Ecuador. This was offset by a decline by 22 countries. The global COVID-19 pandemic proved to be challenging, signaling problems in global health care and the public sector. As a result, the organization urges governments to strengthen oversight, keep transparent contracting processes open, promote accountability, and publish spending and distribution data.