Consequences of Corruption at the Sector Level and Implications for Economic Growth and Development (original) (raw)
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Corruption and economic growth: A meta-analysis of the evidence on low-income countries and beyond
2011
Corruption is a symptom and outcome of institutional deficiency, with potentially adverse effects on economic growth. This paper aims to provide a synthesis of the existing evidence on the relationship between corruption and economic growthcontrolling for effect type, data sources, and country groupings. Using 32 key search terms and 43 low-income country names, we searched in 20 electronic databases and obtained 1,002 studies. Initial screening on the basis of PIOS (Population-Independent Variable-Outcome-Study Design) criteria and critical evaluation on the basis VRA (Validity-Reliability-Applicability) criteria led to inclusion of 115 studies for analysis. We conduct a meta-analysis of the empirical findings in 72 empirical studies, using fixed-effect and random-effect weighted means and testing for significance through precision-effect tests (PETs). Our findings indicate that corruption has a negative effect on per-capita GDP growth overall. We also report that corruption is relatively more detrimental in mixed countries as opposed to low-income countries only and that indirect effects of corruption on growth (through the human capital and public finance channels) are larger than its direct effects. section 4 provides a summary of the findings and derives some policy and research implications. 2. The corruption-growth relationship: motivation and systematic review methodology Like many concepts in social sciences, corruption refers to different practices involving different actors; and may have different consequences in different contexts. Despite this complexity, a principal-agent definition of corruption captures the nature of the problem fairly well. In this definition, corruption is a sub-optimal outcome that results from strategic interaction between an agent (usually a government official with a given level of authority and accountability) and a principal (usually a member of the public). The agent abuses public office to secure private gains from the principal, who is unable to hold the agent accountable due to high monitoring costs (see, Groenendijk, 1997). Estimates of the growth-impact of corruption analysed in this review are based on corruption data from four main sources: (i) the corruption index provided by the International Country Risk Guide (ICRG); (ii) The corruption perceptions index provided by Transparency International (TI); (iii) control of corruption scores provided by the World Governance Indicators (WGI) project of the World Bank; and other sources such as Dreher et al (2007), Economist Intelligence Unit and Sachs and Warner (1997) indices. The corruption data consists of scores between a minimum and a maximum value for each country/year. These are averages of the scores given by individual interviewees at each time period. If surveys are conducted monthly, the country/year average is the 12-month average of the monthly scores. Each study indicates the source(s) of its corruption data and provides information about the score range (which is 0 to 6 for ICRG data,-2.5 to +2.5 for WGI data, 0 to 12 for TI data, and similar ranges in other corruption data sources). This systematic review is motivated by increased national and international efforts aimed at reducing the incidence of corruption and improving governance quality in general. This drive has been at the centre of policy coordination and policy advice led by international organizations such as the United Nations, the World Bank, the IMF and government departments involved in issues of international development such as UK's Depertment for International Development (DFID).
Evidence on the Impact of Corruption on Economic Growth: A Systematic Literature Review
2023
The relationship between corruption and economic growth is complex and has been extensively studied. Till recent days it is still one of the most genuine political challenges that all countries face. Even though anti-corruption measures have improved, they still lack consistency and clarity. Accordingly, this paper reviews the extant literature on this issue, by examining 66 research papers on the impact of corruption on economic growth. The study was aided by analysis of the theme Corruption and economic growth identified in the present literature. Impact of Corruption on economic growth has been tested in multiple studies utilizing time series, panel, and cross-sectional data for various time periods and locations. Although most empirical research has supported the idea that corruption has a considerable impact on economic growth, others have demonstrated that corruption has no significant impact on economic growth. The study draws its conclusions from a variety of investigations. The literature identified that depending on the circumstances, corruption can have both good and bad consequences on economic growth. Besides, the impact of corruption on economic growth varies per country, and time period under consideration based on a variety of characteristics such as economic development, political system, and legal system.
CORRUPTION AND ECONOMIC GROWTH : ACROSS-NATIONAL STUDY Selçuk Akçay
Social, political and institutional factors play a major role in the retarding of development and economic growth in many developing and developed countries. Corruption, which is a symptom of deep institutional weaknesses, is blamed for reducing investments and expenditures (for education and health), inereasing income inequality, reducing foreign direct investments, distorting markets, and allocation of resources. Some writers argue that corruption is also responsible for a low economic growth rate. The purpose of this paper is to examine the impact of corruption on economic growth across 54 developing and developed countries for the period of 1960-1995. Based on the theoretical framework of Barro (1991) and Mauro (1995, 1997), the ernpirical evidence presented suggests that there is a statistic aııy significant negative relationship between corruption and economic growth. The relationship is directly related to inclusion of other determinants of economic growth. 2 • Ankara Ünivers...
The Impact of Corruption on Economic Growth
Handbook of Research on Comparative Economic Development Perspectives on Europe and the MENA Region
Even though corruption is correlated to political and moral degradation, there is no consensus on the impact of corruption on economic growth. Although, theory leans to the view that corruption has negative impact on growth, still empirical evidence and counter arguments show that there might be positive implications for corruption. This paper compares the corruption impact on growth in 17 developed European countries vs. 15 developing MENA countries using a pooled OLS model and a random effects model for the period (1999-2012). This paper contributes to the literature by examining the impact of corruption on growth in scarcely examined countries in Europe and MENA. Also, the paper findings are intriguing because they show that the region, as a proxy to degree of development, significantly influences the effect of corruption on economic growth.
Corruption and Development: A Cross Country Analysis
The Indonesian Journal of Development Planning, 2007
This paper tries to investigate and explain the impact of corruption on per capita GDP across 105 countries. The distinction of this paper comparing to earlier studies is to investigate that the impact of corruption on development is different among countries by involving dummy developed and developing countries and cluster geographical areas (Western and developed countries, Developing countries in Asia, Africa, South America and Caribbean, and Eastern Europe and Ex Soviet Union). The methods used are OLS, 2SLS, and fixed effects regressions. The results show that first, by using OLS and 2SLS, the impact of corruption on per capita GDP is negatively significant. Fixed effects estimation show no impact of corruption on per capita GDP but this is probably due to the short panel as well as measurement error. Second, developing countries have higher impact of corruption on per capita GDP rather than developed countries. Third, looking on across geographical areas, developing countries in Eastern Europe and Ex Soviet Union have the highest negative impact, and then in Asia, Africa, Western and developed countries, and the lowest is in developing countries in South America and Caribbean.
2014
Corruption is a major cause and result of poverty around the globe. It arises at all levels of society, from national governments and military to small businesses and sports. Corruption affects all elements of society in some way as it undermines democracy and economic growth as well as the environment and people’s health.The main purpose of this thesis is to examine if corruption has a significant effect on economic growth in developing countries. The empirical analysis is conducted with a regression analysis, using data from recognized institutions. Other variables that can affect GDP per capita growth are also examined such as the level of democracy, fertility rate, life expectancy, education and the Initial GDP per capita to test for conditional convergence. In our main model, the empirical results show that corruption does not have a significant effect on economic growth but this is basically due to that the model exhibits multicollinearity. In our second model, where we omitte...
The Impact of Corruption on Economic Growth in OIC Countries
International Journal of Economics and Finance, 2016
Economic growth in a country can be attributed to many variables, both positive and negative. Raising the level of human capital, openness and investment are examples of factors typically considered to have a positive impact on economic progress, while corruption is one of the factors that are often seen as detrimental to economic growth. The purpose of this study is to analyse whether the levels of perceived corruption in a cross-section of countries have affected their economic growth rates over the years 2003-2010. The study is conducted with a regression on a sample of 14 countries and eight variables for the time period in question. The models are constructed on the basis of the endogenous growth theory. Results using economic freedom index (EFI) shows that corruption has a negative impact of economic growth in the countries in question.
The Impact of Corruption on Some Aspects of the Economy
International Journal of Economics and Finance, 2013
Theoretical and empirical debate on the impact of corruption on the economy remains unclear. Many studies on corruption seem that the world is occupied by two kinds of people, "sanders" and "greasers". It depends on what the meaning of "corruption" is for them. Some scholars argue that corruption is an obstacle to economic growth, whereas others believe that corruption can (in some circumstances) endorse growth. Corruption also has a negative impact on investment, Foreign Direct Investment, and economic development as a whole. Measuring corruption is still an issue for most economists due to the difficulties of defining it, and also different forms of corruption require different objective measures. Nevertheless, recently, some measures of corruption have been widely accepted and recognised by researchers. This paper is a critical review at these positions by reviewing the theoretical literature on the impact of corruption on an economy as a whole. It is concluded that there is not enough evidence to support the "greasing the wheels" hypothesis. Instead, this document reviews different measurements of corruption to reveal that corruption is harmful for the economy.
2001
Corruption is a phenomenon that plagues many countries and, mostly, walks hand in hand with inefficient institutional structures, which reduce the effectiveness of public and private investment. In countries with widespread corruption, for each monetary unit invested, a sizable share is wasted, implying less investment. Corruption can also be a burden on a nation's wealth and economic growth, by driving away new investment and creating uncertainties regarding private and social rights. Thus, corruption can affect not only factors productivity, but also their accumulation, with detrimental consequences on a society's social development. This article aims to analyze and measure the influence of corruption on a country's wealth. It is implicitly admitted that the degree of institutional development has an adverse effect on the productivity of production factors, which implies in reduced per capita income. It is assumed that the level of wealth and economic growth depends on domestic savings, foster technological progress and a proper educational system. Corruption, within this framework, is not unlike an additional cost, which stifles the "effectiveness" of the investment. This article first discusses the key theories evaluating corruption's economic consequences. Later, it analyzes the relation between institutional development, factor productivity and per capita income, based on the neoclassical approach to economic growth. Finally, it brings some empirical evidence regarding the effects of corruption on factor productivity, in a sample of 81 countries studied in 1998. The chief conclusion is that corruption negatively affects the wealth of a nation by reducing capital productivity, or its effectiveness.