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Corruption, governance, investment and growth in emerging markets

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Author Info

  • Stephen Everhart
  • Jorge Martinez- Vazquez
  • Robert McNab

Abstract

The article investigates the potential impact of corruption on economic growth by examining the effect that corruption may have on several significant determinants of economic growth, namely, investment in human, private and public capital, and on governance. Our theoretical approach allows for corruption to influence economic growth directly and indirectly through different investment and governance channels. All previous empirical work on this issue has been based on national income and product accounts (NIPA) data, which do not normally break down gross domestic investment into its private and public sector, and if they do, they misclassify investment by public enterprises as private investment, potentially biasing empirical findings. In this article we use a data set from the International Finance Corporation that bypasses these problems. We find that the impact of corruption on the level of public investment appears to be more ambiguous than it has been found in the previous literature. We, however, find that the impact of corruption on the accumulation of private capital is significantly more damaging than what has been previously found. We also find that the impact of corruption on governance is unambiguously negative, which further deters economic growth.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 41 (2009)
Issue (Month): 13 ()
Pages: 1579-1594

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Handle: RePEc:taf:applec:v:41:y:2009:i:13:p:1579-1594

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Cited by:
  1. Simplice A, Asongu & Oasis, Kodila-Tedika, 2013. "Crime and conflicts in Africa: consequences of corruption?," MPRA Paper 44043, University Library of Munich, Germany.
  2. Ugur, Mehmet & Dasgupta, Nandini, 2011. "Corruption and economic growth: A meta-analysis of the evidence on low-income countries and beyond," MPRA Paper 31226, University Library of Munich, Germany, revised 31 May 2011.
  3. Timothy Hinks & Artjoms Ivlevs, 2012. "Bribing Behaviour and Sample Selection: Evidence from Post-Socialist countries and Western Europe," Working Papers 20121208, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
  4. Dzhumashev, Ratbek, 2009. "Is there a direct effect of corruption on growth?," MPRA Paper 18489, University Library of Munich, Germany.
  5. Jan Hanousek & Evžen Kočenda, 2011. "Corruption and Economic Freedom Links to Public Finance and Investment in New EU Members," Politická ekonomie, University of Economics, Prague, vol. 2011(3), pages 310-328.
  6. Jan Hanousek & Evžen Kočenda, 2011. "Public Investment and Fiscal Performance in the New EU Member States," Fiscal Studies, Institute for Fiscal Studies, vol. 32(1), pages 43-71, 03.
  7. Buia, Raluca E. & Molinari, M. Cristina, 2012. "Corruption and positive selection in privatization," Research in Economics, Elsevier, vol. 66(4), pages 297-304.
  8. Jan HANOUSEK & Evžen KOČENDA, 2010. "Public investment and fiscal performance in new EU member states," Departmental Working Papers 2010-07, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  9. Farla, Kristine, 2013. "Determinants of firms' investment behaviour: A multilevel approach," MERIT Working Papers 055, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  10. Zohid Askarov & Hristos Doucouliagos, 2013. "Does aid improve democracy and governance? A meta-regression analysis," Public Choice, Springer, vol. 157(3), pages 601-628, December.

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