Corruption and economic growth: does the size of the government matter?

Antonio Afonso and Eduardo Sá Fortes Leitão Rodrigues ()
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Eduardo Sá Fortes Leitão Rodrigues: Universidade Federal Rural Do Rio de Janeiro

Economic Change and Restructuring, 2022, vol. 55, issue 2, No 1, 543-576

Abstract: Abstract Corruption is often a source of contentious debate, covering different areas of knowledge, such as philosophy and sociology. In this paper we assess the effects of corruption on economic activity and highlight the relevance of the size of the government. We use dynamic models and the generalised method of moments approach for a panel of 48 countries, and as a measure of corruption the Transparency International's Corruption Perceptions Index, from 2012 to 2019. We find a significant adverse effect of corruption on the level and growth of GDP per capita, but that large governments benefit less from reducing corruption. Furthermore, developing economies, regardless of government size, benefit less from reducing corruption, while government size is not sufficient to explain the influence of corruption on economic activity, although the level of effectiveness of public services is crucial. Finally, our findings suggest that private investment is a potential transmission channel for corruption.

Keywords: Corruption; Economic growth; Government size; Generalised method of moments; Forward orthogonal deviations (search for similar items in EconPapers)
JEL-codes: C23 D73 K42 O40 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Working Paper: Corruption and Economic Growth: Does the Size of the Government Matter? (2021)
Working Paper: Corruption and economic growth: does the size of the government matter? (2021)
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DOI: 10.1007/s10644-021-09338-4

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