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Corruption, Globalization, and Economic Growth: Theory and Evidence

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  • Kunieda, Takuma
  • Okada, Keisuke
  • Shibata, Akihisa

Abstract

We investigate, both theoretically and empirically, how the negative effects of government corruption on economic growth are magnified or reduced by capital account liberalization. Our model shows that highly corrupt countries impose higher tax rates than do less corrupt countries, thereby, magnifying the negative impacts of government corruption on economic growth in the highly corrupt countries and reducing the impacts in the less corrupt countries if capital account liberalization is enacted. Empirical evidence obtained from an analysis of the panel data collected from 111 countries supports our theoretical predictions. Our theoretical and empirical results contribute to the recent policy debates on the merits or demerits of capital account liberalization.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35355.

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Date of creation: 24 Nov 2011
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Handle: RePEc:pra:mprapa:35355

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Keywords: Economic growth; Government Corruption; Capital account liberalization; Two-country model;

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