This article argues that corrupt practices such as bribery and embezzlement, which scholars have previously assumed to be evidence of the breakdown of the state, may reinforce the state's administrative hierarchies under certain conditions. Drawing on a cross-national analysis of 132 countries and a detailed examination of the informal institutions of official graft in Ukraine, the article finds that where graft is systematically tracked, monitored, and granted by state leaders as an informal payment in exchange for compliance, it provides both (...) an added incentive to obey leaders' directives and the potent sanction of criminal prosecution in the event of disobedience. Where graft is informally institutionalized in this way, it provides the basis for state organizations that are effective at collecting taxes, maintaining public order, and repressing political opposition but that may undermine the development of liberal politics. (shrink)