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Does Corruption Affect Economic Growth?

Eatzaz Ahmad, Muhammad Aman Ullah and Muhammad Irfanullah Arfeen

Latin American Journal of Economics-formerly Cuadernos de Economía, 2012, vol. 49, issue 2, 277-305

Abstract: 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 dif ferentiated 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.

Keywords: corruption; economic growth; institutional quality; bureaucratic; efficiency; political stability (search for similar items in EconPapers)
JEL-codes: D73 O4 O43 P48 (search for similar items in EconPapers)
Date: 2012
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Latin American Journal of Economics-formerly Cuadernos de Economía is currently edited by Raimundo Soto

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