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Does corruption foster growth in Bangladesh?

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  • Biru Paksha Paul
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    Abstract

    Purpose – The purpose of the paper is to unveil the relationship between corruption and economic growth in Bangladesh. Design/methodology/approach – The paper is designed to combine both theory and empirical work. Findings – Bangladesh poses a positive relation between corruption and growth. This relationship has been significant since 1977 when Bangladesh embarked on a market economy and unleashed private investment, but failed to implement corresponding reforms in bureaucracy and major public utilities. As a result, consumers with rising income and producers with thriving business opportunities confronted public regulatory bodies for utilities and permits, and indulged in increasing corruption. Thus, both corruption and economic growth increased with the pace of privatisation and the market economy in Bangladesh. Hence, a positive association between corruption and growth, though spurious and co-incidental, becomes apparent. Research limitations/implications – A bigger sample size for survey can be covered in the future. Practical implications – While corruption does not foster growth, it greases the wheels of commerce in Bangladesh's regulation-heavy systems that would otherwise impede businesses. Social implications – It can be argued that Bangladesh has the potentials to make growth performance even brighter if corruption can be further reduced through comprehensive liberalisation and bureaucratic reform. Originality/value – Conventional wisdom suggests that corruption impedes economic growth. But this relationship is not that simple and straight forward in Bangladesh as it initially appears to be. Other institutional factors must be addressed before spurring growth in the country. This finding has implications to the development policymakers of Bangladesh or other emerging economies that experience both high growth and high corruption.

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    Bibliographic Info

    Article provided by Emerald Group Publishing in its journal International Journal of Development Issues.

    Volume (Year): 9 (2010)
    Issue (Month): 3 (July)
    Pages: 246-262

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    Handle: RePEc:eme:ijdipp:v:9:y:2010:i:3:p:246-262

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    Web page: http://www.emeraldinsight.com

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    Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
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    Related research

    Keywords: Bangladesh; Corruption; Economic growth; Organizations; Politics;

    References

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    1. Blackburn, Keith & Bose, Niloy & Emranul Haque, M., 2006. "The incidence and persistence of corruption in economic development," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2447-2467, December.
    2. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
    3. Philip Shaw & Marina-Selini Katsaiti & Marius Jurgilas, 2006. "Corruption and Growth Under Weak Identification," Working papers 2006-17, University of Connecticut, Department of Economics, revised Mar 2007.
    4. Bigsten, Arne & Moene, Karl Ove, 1996. "Growth and Rent Dissipation: The Case of Kenya," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 5(2), pages 177-98, June.
    5. Nobuo Akai & Yusaku Horiuchi & Masayo Sakata, 2005. "Short-run and Long-run Effects of Corruption on Economic Growth: Evidence from State-Level Cross-Section Data for the United States," CIRJE F-Series CIRJE-F-348, CIRJE, Faculty of Economics, University of Tokyo.
    6. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
    7. Fisman, Raymond & Svensson, Jakob, 2000. "Are corruption and taxation really harmful to growth? - firm-level evidence," Policy Research Working Paper Series 2485, The World Bank.
    8. Mo, Pak Hung, 2001. "Corruption and Economic Growth," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 66-79, March.
    9. Aidt, T. & Dutta, J. & Vania Sena, 2005. "Growth, Governance and Corruption in the Presence of Threshold Effects: Theory and Evidence," Cambridge Working Papers in Economics 0540, Faculty of Economics, University of Cambridge.
    10. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    11. Neeman, Zvika & Paserman, Daniele & Simhon, Avi, 2003. "Corruption And Openness," Discussion Papers 14977, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    12. Lorenzo Pellegrini & Reyer Gerlagh, 2004. "Corruption's Effect on Growth and its Transmission Channels," Kyklos, Wiley Blackwell, vol. 57(3), pages 429-456, 08.
    13. Rahman, Aminur & Kisunko, Gregory & Kapoor, Kapil, 2000. "Estimating the effects of corruption - implications for Bangladesh," Policy Research Working Paper Series 2479, The World Bank.
    14. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
    15. Pierre-Guillaume Méon & Laurent Weill, 2004. "Does corruption hamper efficiency? A frontier analysis," ULB Institutional Repository 2013/8382, ULB -- Universite Libre de Bruxelles.
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    Cited by:
    1. M. Wasiqur Rahman Khan & Haydory Akbar Ahmed, 2012. "Dynamics of foreign earnings, assistance and debt servicing in Bangladesh," International Journal of Development Issues, Emerald Group Publishing, vol. 11(1), pages 74-84, April.
    2. Farooq, Abdul & Shahbaz, Muhammad & Arouri, Mohamed & Teulon, Frédéric, 2013. "Does corruption impede economic growth in Pakistan?," Economic Modelling, Elsevier, vol. 35(C), pages 622-633.

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