Corruption and economic growth (with Vietnam case-study)

Nguyen Ngoc Anh, Nguyen Ngoc Minh and Binh Tran-Nam
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Nguyen Ngoc Anh: Development and Policies Research Center (DEPOCEN), Hanoi, Vietnam
Nguyen Ngoc Minh: Development and Policies Research Center (DEPOCEN), Hanoi, Vietnam
Binh Tran-Nam: School of Taxation and Business Law, Business School, University of New South Wales, Sydney, Australia

No 183, Working Papers from Development and Policies Research Center (DEPOCEN), Vietnam

Abstract: Despite the Government's recognition of the serious threat of uncontrolled corruption to the legitimacy and long-term survival of the current political system, Vietnam is still struggling to translate its policies and comparatively strong legislative framework into practice. There exists little reliable, quantitative evidence of the harmful impact of corruption on economic growth in Vietnam. Using the most updated and available data and a model incorporating transmission channels, this article attempts to estimate the direct and indirect effects of corruption on GDP growth rate. In general, the findings confirm the negative association between corruption and economic growth. Investment appears to be the most important transmission channel and the effect of corruption on investment is non-linear so that indirect effects of corruption on growth (via investments) depends on the value of each country's corruption level. In case of Vietnam, a one unit increase in the corruption perception index (CPI) leads to a 2.15% increase in the proportion of gross domestic investment over GDP, which in turns increases growth rate by 0.372%. Counting both direct and indirect effects, a one-unit increase in the corruption perception index (CPI) will increase the growth rate by 0.509%, indicating that the investment channel accounts for 62.92% of total effects.

Pages: 26 pages
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:dpc:wpaper:0116

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