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Influence of corruption on economic growth rate and foreign investments

Author

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  • Boris Podobnik
  • Jia Shao
  • Djuro Njavro
  • Plamen Ch. Ivanov
  • H. Eugene Stanley

Abstract

In order to investigate whether government regulations against corruption can affect the economic growth of a country, we analyze the dependence between Gross Domestic Product (GDP) per capita growth rates and changes in the Corruption Perceptions Index (CPI). For the period 1999-2004 on average for all countries in the world, we find that an increase of CPI by one unit leads to an increase of the annual GDP per capita by 1.7 %. By regressing only European transition countries, we find that $\Delta$CPI = 1 generates increase of the annual GDP per capita by 2.4 %. We also analyze the relation between foreign direct investments received by different countries and CPI, and we find a statistically significant power-law functional dependence between foreign direct investment per capita and the country corruption level measured by the CPI. We introduce a new measure to quantify the relative corruption between countries based on their respective wealth as measured by GDP per capita.

Suggested Citation

  • Boris Podobnik & Jia Shao & Djuro Njavro & Plamen Ch. Ivanov & H. Eugene Stanley, 2007. "Influence of corruption on economic growth rate and foreign investments," Papers 0710.1995, arXiv.org.
    • Handle: RePEc:arx:papers:0710.1995
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