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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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Author Info

  • Nobuo Akai

    (School of Business Administration, University of Hyogo)

  • Yusaku Horiuchi

    (Asia Pacific School of Economics and Government, Australian National University)

  • Masayo Sakata

    (Faculty of Politics, Economics and Law, Osaka International University)

Abstract

Theoretical studies suggest that corruption may counteract government failure and promote economic growth in the short run, given exogenously determined suboptimal 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 CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-348.

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Length: 31 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:tky:fseres:2005cf348

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Cited by:
  1. 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.
  2. 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.
  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. Kodila Tedika, Oasis, 2012. "Consequences De La Corruption : Panorama Empirique
    [Consequences of Corruption : Empirical survey]
    ," MPRA Paper 41482, University Library of Munich, Germany.
  5. 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.
  6. Dridi, Mohamed, 2013. "Corruption and Economic Growth: The Transmission Channels," MPRA Paper 47873, University Library of Munich, Germany.
  7. Pushkarev, Oleg, 2007. "Corruption and Economic Development of Russia: A Regional Aspect," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 6(2), pages 81-94.
  8. 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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