We develop an equilibrium model to analyze the ináuence of economic
and cultural factors on the level of corruption that can be found in di§erent
countries. We focus our attention on the level of achievement motivation and the importance of social networks for trade in the informal economy, both of which increase the willingness of agents to participate in corrupt activities. These variables together with productivity in the formal economy and the ability of authorities to punish corruption determine the level of corruption that prevails in equilibrium. There are multiple equilibria, and societies may get trapped in a steady state equilibrium of generalized corruption. We test the predictions of the theoretical model using empirical evidence from a variety of sources for a large cross-section of countries and use two-stage least squares methods to asses the direction of causality.