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Corruption, bureaucracy and other institutional failures: the “cancer†of innovation and development

Author

Listed:
  • Leonardo A. Rocha

    (Federal Rural University of the Semi-arid)

  • Maria Ester S. Dal Poz

    (University of Campinas)

  • Patrícia V.P.S. Lima

    (Federal University of Ceará)

  • Ahmad S. Khan

    (Federal University of Ceará)

  • Napiê G. A. Silva

    (Federal Rural University of the Semi-arid)

Abstract

This study analyzes the impact of corruption on the elasticity of R&D investments in sales per worker by firms. In this sense, it built a model of Schumpeterian growth using optimal control theory relating the effects of corruption on demand for R&D. The model results show that corruption negatively affects the R&D demand and long-term rate of technical progress. However, this cost attributes different 'weights' as firms approach the technological frontier. To empirically test this relationship, it was built partial order-ï ¡ frontiers on a sample of 2,000 firms from 40 sectors and 46 countries. Interacting efficiency scores with the corruption index, the less-efficient firms are disadvantaged with corruption in relation to the frontier firms. This pattern is observed in the coefficient of elasticity of R&D investments indicating that corruption leads to different costs, 'favoring' the most efficient firms in relation to the most backward firms.

Suggested Citation

  • Leonardo A. Rocha & Maria Ester S. Dal Poz & Patrícia V.P.S. Lima & Ahmad S. Khan & Napiê G. A. Silva, 2019. "Corruption, bureaucracy and other institutional failures: the “cancer†of innovation and development," Economics Bulletin, AccessEcon, vol. 39(3), pages 1740-1754.
    • Handle: RePEc:ebl:ecbull:eb-19-00454
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    More about this item

    Keywords

    Corruption; Innovation; Development;
    All these keywords.

    JEL classification:

    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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