Corruption and Openness
Abstract
We report an intriguing empirical observation. The relationship between corruption and output depends on the economy’s degree of openness: in open economies, corruption and GNP per capita are strongly negatively correlated; but in closed economies, there is no relationship at all. This stylized fact is robust to a variety of different empirical specifications. In particular, the same basic pattern persists if we use alternative measures of openness, if we focus on different time periods, if we restrict the sample to include only highly corrupt countries, if we restrict attention to specific geographic areas or to poor countries, and if we allow for the possible endogeneity of both the corruption and openness measures. We find that the extent to which corruption affects output is determined primarily by the degree of financial openness. The difference between closed and open economies is mainly due to the different effect of corruption on capital accumulation. We present a model, consistent with these findings, in which the main channel through which corruption affects output is capital drain.Download Info
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Paper provided by The Center for the Study of Rationality, Hebrew University, Jerusalem in its series Discussion Paper Series with number dp353.Length: 41 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:huj:dispap:dp353
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Keywords: corruption; growth; openness;Other versions of this item:
- Neeman, Zvika & Paserman, Daniele & Simhon, Avi, 2003. "Corruption And Openness," Discussion Papers 14977, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
- Zvika Neeman & Daniele Paserman & Avi Simhon, 2006. "Corruption and Openness," 2006 Meeting Papers 164, Society for Economic Dynamics.
- Neeman, Zvika & Paserman, Marco Daniele & Simhon, Avi, 2003. "Corruption and Openness," CEPR Discussion Papers 4057, C.E.P.R. Discussion Papers.
- F2 - International Economics - - International Factor Movements and International Business
- H0 - Public Economics - - General
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-03-28 (All new papers)
- NEP-DEV-2004-03-28 (Development)
- NEP-LAM-2004-03-28 (Central & South America)
- NEP-PBE-2004-03-28 (Public Economics)
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Blog mentions
As found by EconAcademics.org, the blog aggregator for Economics research:- The cost of corruption
by Economic Logician in Economic Logic on 2008-12-09 15:02:00
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