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

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Author Info
Aidt, T.
Dutta, J.
Vania Sena

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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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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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Related research
Keywords: Growth corruption threshold effects governance democracy corruption.

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Maria Del Mar Salinas-Jimenez & Javier Salinas-Jimenez, 2006. "Corruption and Productivity Growth in OECD Countries," ERSA conference papers ersa06p99, European Regional Science Association. [Downloadable!]
  2. Levy, Daniel, 2007. "Price adjustment under the table: Evidence on efficiency-enhancing corruption," MPRA Paper 1648, University Library of Munich, Germany. [Downloadable!]
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