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Corruption and Pro-Poor Growth Outcomes: Evidence and Lessons for African Countries

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  • Léonce Ndikumana

Abstract

There is growing consensus that corruption hurts economic performance by reducing private investment, adversely affecting the quantity and quality of public infrastructure, reducing tax revenue, and reducing human capital accumulation. In addition to inefficiency effects—lower growth for a given endowment in factors and technology—corruption also has adverse distributional effects as it hurts the poor disproportionately. For a given level of government budget and national income, high corruption countries have lower literacy rates, higher mortality rates, and overall worse human development outcomes. Corruption deepens poverty by reducing pro-poor pubic expenditures, creating artificial shortages and congestion in public services, and inducing a policy bias in favor of capital intensity, which perpetuates unemployment. High levels of corruption in African countries constitute one of the factors behind slow growth and limited progress in poverty reduction. Eradicating corruption in African bureaucracies is a challenging task, especially because it is a systemic phenomenon with effects that often lag far behind the causes. Therefore, explicit strategies are necessary to change the incentive structure by modifying the payoffs and sanctions that govern the interactions between bureaucrats and private economic operators. Strategies to fight corruption include measures to increase transparency in the management of public resources, establishing an incentive structure that rewards honest behavior among civil servants, enforcing transparency in international contracts and equal penalties to all parties to corrupt deals, and promotion of a free and responsible media.

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Bibliographic Info

Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp120.

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Date of creation: 2006
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Handle: RePEc:uma:periwp:wp120

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Related research

Keywords: Corruption; pro-poor growth; rent-seeking; African countries;

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References

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  1. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  2. Erwin Tiongson & Hamid Reza Davoodi & Sanjeev Gupta, 2000. "Corruption and the Provision of Health Care and Education Services," IMF Working Papers 00/116, International Monetary Fund.
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  8. Léonce Ndikumana, 2002. "Public Debts and Private Assets:Explaining Capital Flight from Sub-Saharan African Countries," Working Papers wp32, Political Economy Research Institute, University of Massachusetts at Amherst.
  9. Hillman, Arye L., 2004. "Corruption and public finance: an IMF perspective," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1067-1077, November.
  10. Gauthier, Bernard & Reinikka, Ritva, 2001. "Shifting tax burdens through exemptions and evasion - an empirical investigation of Uganda," Policy Research Working Paper Series 2735, The World Bank.
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  13. Sanjeev Gupta & Hamid Davoodi & Rosa Alonso-Terme, 2002. "Does corruption affect income inequality and poverty?," Economics of Governance, Springer, vol. 3(1), pages 23-45, 03.
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  18. Léonce Ndikumana & James Boyce, 2002. "Africa’s Debt: Who Owes Whom?," Working Papers wp48, Political Economy Research Institute, University of Massachusetts at Amherst.
  19. Ritva Reinikka & Jakob Svensson, 2005. "Fighting Corruption to Improve Schooling: Evidence from a Newspaper Campaign in Uganda," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 259-267, 04/05.
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Citations

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Cited by:
  1. Léonce Ndikumana & Mina Baliamoune-Lutz, 2008. "Corruption and Growth: Exploring the Investment Channel," UMASS Amherst Economics Working Papers 2008-08, University of Massachusetts Amherst, Department of Economics.
  2. Negin, Vahideh & Abd Rashid, Zakariah & Nikopour, Hesam, 2010. "The Causal Relationship between Corruption and Poverty: A Panel Data Analysis," MPRA Paper 24871, University Library of Munich, Germany.
  3. Rasha Hashim Osman & Constantinos Alexiou & Persefoni Tsaliki, 2012. "The role of institutions in economic development: Evidence from 27 Sub-Saharan African countries," International Journal of Social Economics, Emerald Group Publishing, vol. 39(2), pages 142-160, January.

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