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Growth, Governance and Corruption in the Presence of Threshold Effects: Theory and Evidence

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  • Aidt, T.
  • Dutta, J.
  • Vania Sena

Abstract

We study the joint determination of corruption and economic growth. Our model can generate multiple equilibria when complementarity between corruption and growth is sufficiently strong. Our estimates of the impact of corruption on growth take into account that corruption is endogenous and that there may exist different growth/corruption regimes. In a cross section of countries in the 1990s,we identify two regimes, conditional on the quality of political institutions. In the regime with high quality political institutions, corruption has a negative impact on growth. In the regime with low quality institutions, corruption has, overall, little impact on growth, but, if anything, the impact is, surprisingly, positive.

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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0540.

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Date of creation: Sep 2005
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Handle: RePEc:cam:camdae:0540

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Web page: http://www.econ.cam.ac.uk/index.htm

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Keywords: Growth; corruption; threshold effects; governance; democracy; corruption.;

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Cited by:
  1. Levy, Daniel, 2007. "Price adjustment under the table: Evidence on efficiency-enhancing corruption," European Journal of Political Economy, Elsevier, vol. 23(2), pages 423-447, June.
  2. Maria Del Mar Salinas-Jimenez & Javier Salinas-Jimenez, 2006. "Corruption and Productivity Growth in OECD Countries," ERSA conference papers ersa06p99, European Regional Science Association.
  3. 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.
  4. Aidt, Toke S. & Dutta, Jayasri, 2007. "Policy myopia and economic growth," European Journal of Political Economy, Elsevier, vol. 23(3), pages 734-753, September.
  5. Biru Paksha Paul, 2010. "Does corruption foster growth in Bangladesh?," International Journal of Development Issues, Emerald Group Publishing, vol. 9(3), pages 246-262, July.

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