Effects corruption economic growth

This work finds that countries where income inequality is decreasing grow faster than those with rising inequality.

Effects corruption economic growth

Effects of corruption on economic growth in Kenya

The model provides a simple theoretical framework in which the level of corruption as well as the effects of corruption on output variables; forging direct investments, government expenditure, openness and political instability are identified. Our main result provides empirical evidence suggesting that corruption increases inefficiencies in government expenditure and reduces investment and human capital, leading to a negative impact on output.

In addition, the human capital, openness and political instability are the most important channel variables, through which corruption is likely to reduce growth. Corruption, Development, Governance, Economic Growth 1. Introduction Over the past years, the question of the economic consequences of corruption on economic growth has long been a subject of analysis and debate.

The analysis and debate are essentially focused on the effect of corruption on economic growth. In previous literature, several studies have generally found a negative relation between corruption on one hand and investment and growth on the other hand [1] - [3].

Currently, different organizations view corruption as a Effects corruption economic growth obstacle to good policy making [4]. Other papers claim that if corruption is likely to affect economic growth, its effect would be transmitted indirectly via its impacts on the standard determinants of economic growth.

This fact was reinforced by the results of a number of studies that explicitly argued that the total effect of corruption on economic growth could be decomposed into a direct impact and a set of indirect effects manifested by a number of transmission variables [5] - [7].

Corruption can affect economy on different ways, and it is important to understand the range and diversity of the mechanisms involved.


There is a wide consensus among economists that corruption distorts relative prices, discourages savings and investment, and hinders economic growth and development [8] [9]. Despite a considerable number of theoretical and empirical studies, there is still no agreement on the different ways in which corruption might affect economic growth.

The diversion of talent from productive to rent-seeking activities i. On the other hand, some studies claim that corruption in an economy acts like a grabbing hand that increases the costs of carrying out business activities and therefore increase the costs of foreign investments and will, therefore, discourage FDI for both developed and developing countries [11] - [17].

Others argued that corruption might lead to a general misallocation of public expenditures as certain areas of spending military spending were targeted more for their capacity to generate bribes than their potential to improve living standards [20] [21]. Furthermore, other authors including [22] [23] have provided similar evidence and reported that the relationship between corruption and economic growth became statistically insignificant after controlling for other important determinants of growth, such as investments, human capital, openness and political instability.

Corruption — Global Issues

The main conclusion that can be derived from the above studies is that the relation between corruption and economic growth is empirically very ambiguous.

Some studies find a significant negative effect of corruption on growth; others show that the effect is statistically insignificant, while others show the effect to be heterogeneous across countries with different institutional frameworks. This means that corruption is deleterious for economic growth but the exact channels through which it affects economic growth are not resolved empirically.

Based on the main propositions of previous literature, we develop a new analytical framework to investigate the relation between corruption and economic growth in Egypt and also highlight the mechanisms through which corruption could affect growth. The channels under consideration include foreign direct investment, government expenditure, human capital, openness, and political instability.

To our knowledge, there were few earlier studies examined the effect of corruption on economic growth in Egypt. None of these papers used any econometric analysis to evaluate the effect of corruption on the economic growth either in direct or indirect way.

Effects corruption economic growth

The main objective of this paper, therefore, is to analyze and estimate the effect of corruption on economic growth by performing an econometric analysis with reference to the Egyptian economy. The paper emphasises three questions: First, does corruption affect economic growth in Egypt? Second, is there evidence of a negative correlation between corruption and economic growth?

And third, what are the main channels through which corruption affects economic growth? In order to answer previous questions, this study quantifies both direct and indirect effect of corruption on economic growth and also augments the prior literature by three ways:In countries with relatively strong democratic institutions, the researchers conclude that corruption does damage growth, but also that economic growth itself is a strong guarantor of reducing.

This article analyzes the relationship between corruption and economic growth in the countries of the Economic and Monetary Community of Central Africa (EMCCA).

To our knowledge, there are no works dealing with the direct relations between the two variables in such a framework. The second step was to identify the impact of corruption on economic growth using the IMF study.

Economic Growth In Nigeria - Impact Of Oil Industry

The study estimates that the impact of 1 point change in the corruption index results in a percentage point change in economic growth per annum. Corruption. It is an overloaded word often used as the sole cause of the problems in poor countries. Yet, corruption seems to be everywhere, indeed often encouraged by rich countries and their corporations, especially when it comes to natural resources, and arms trade.

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The negative effect of corruption on tax revenue from goods and services is statistically significant at least at the 5% level in three out of four models and it is also significant at the 10% level in one model.

The impact on the private sector is also considerable, it impedes economic growth, distorts competition and requests serious legal and reputational risks. Corruption is also very costly for business, with the extra financial burden estimated to add 10 % or more to the costs of .

Effects corruption economic growth
Effect Of Corruption In Economic Growth -- ding | PRLog