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Short-run and Long-run Effects of Corruption on Economic Growth: Evidence from State-Level Cross-Section Data for the United States

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  • Nobuo Akai
  • Yusaku Horiuchi
  • Masayo Sakata

Abstract

Theoretical studies suggest that corruption may counteract government failure and promote economic growth in the short run, given exogenously determined sub optimal bureaucratic rules and regulations. As the government failure is itself a function of corruption, however, corruption should have detrimental effects on economic growth in the long run. In this paper, we measure the rate of economic growth for various time spans—short (1998–2000), middle (1995–2000) and long (1991–2000)—using previously uninvestigated state-level cross-section data for the United States. Our two-stage least square (2SLS) estimates with a carefully selected set of instruments show that the effect of corruption on economic growth is indeed negative and statistically significant in the middle and long spans but insignificant in the short span.

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Bibliographic Info

Paper provided by International and Development Economics in its series International and Development Economics Working Papers with number idec05-5.

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Length: 32 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:idc:wpaper:idec05-5

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Cited by:
  1. Pushkarev, Oleg, 2007. "Corruption and Economic Development of Russia: A Regional Aspect," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 6(2), pages 81-94.
  2. Aliyu, Shehu Usman Rano & Elijah, Akanni Oludele, 2008. "Corruption and Economic Growth in Nigeria: 1986 -2007," MPRA Paper 12504, University Library of Munich, Germany, revised 07 Dec 2008.
  3. 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.
  4. Maria Amin & Adeel Ahmed & Khalid Zaman, 2013. "The Relationship Between Corruption And Economic Growth In Pakistan — Looking Beyound The Incumbent," Oeconomics of Knowledge, Saphira Publishing House, vol. 5(3), pages 15-45, July.
  5. Kodila Tedika, Oasis, 2012. "Consequences De La Corruption : Panorama Empirique
    [Consequences of Corruption : Empirical survey]
    ," MPRA Paper 41482, University Library of Munich, Germany.
  6. Egunjobi T. Adenike, 2013. "An econometric analysis of the impact of Corruption on economic growth in Nigeria," E3 Journal of Business Management and Economics., E3 Journals, vol. 4(3), pages 054-065.
  7. Andreas Assiotis & Kevin Sylwester, 2013. "Do the effects of corruption upon growth differ between democracies and autocracies?," University of Cyprus Working Papers in Economics 06-2013, University of Cyprus Department of Economics.
  8. Dridi, Mohamed, 2013. "Corruption and Economic Growth: The Transmission Channels," MPRA Paper 47873, University Library of Munich, Germany.
  9. Craigwell, Roland & Wright, Allan S, 2011. "Foreign Direct Investment and Corruption in Developing Economies: Evidence form Linear and Non-Linear Panel Causality Tests," MPRA Paper 40933, University Library of Munich, Germany.

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