DOES CORRUPTION AFFECT ECONOMIC GROWTH?

Using panel data from the International Country Risk Guide corruption index, institutional quality and political stability indices and several state variables for developed and developing countries, this paper explores the linear quadratic empirical relationship between corruption and economic growt...

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Bibliographic Details
Published in:Latin american journal of economics 2012-11, Vol.49 (2), p.277-305
Main Authors: Ahmad, Eatzaz, Ullah, Muhammad Aman, Arfeen, Muhammad Irfanullah
Format: Article
Language:English
Subjects:
Bureaucracy
Corruption
Corruption in government
Country risk
Developing countries
Econometrics
Economic development
Economic growth
Economic growth models
Economic growth theories
Economic indices
Economic models
Economic theory
Economists
GDP
Generalized method of moments
Government bureaucracy
Government corruption
Gross Domestic Product
Gross domestic product indices
Hypotheses
Indexes
International organizations
Long run economic growth
Political corruption
Politics
Studies
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Summary:Using panel data from the International Country Risk Guide corruption index, institutional quality and political stability indices and several state variables for developed and developing countries, this paper explores the linear quadratic empirical relationship between corruption and economic growth. Empirical literature has shown a linear relationship between corruption and economic growth but hasn't differentiated between growthenhancing and growth-reducing levels of corruption. An analysis based on the generalized method of moments estimation shows that a decrease in corruption raises the economic growth rate in an inverted U-shaped way. This result is robust with respect to alternative specifications of the econometric relationship.
ISSN:0719-0425
0719-0433
DOI:10.7764/LAJE.49.2.277