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Is corruption an efficient grease?

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  • Méon, Pierre-Guillaume
  • Weill, Laurent

Abstract

This paper tests whether corruption may act as an efficient grease for the wheels of an otherwise deficient institutional framework. We analyze the interaction between aggregate efficiency, corruption, and other dimensions of governance for a panel of 54 developed and developing countries. Using three measures of corruption and five measures of other aspects of governance, we observe that corruption is consistently detrimental in countries where institutions are effective, but that it may be positively associated with efficiency in countries where institutions are ineffective. We thus find evidence of the grease the wheels hypothesis. Keywords: governance, corruption, income, aggregate productivity, efficiency JEL Classification: C33, K4, O43, O47.

Suggested Citation

  • Méon, Pierre-Guillaume & Weill, Laurent, 2008. "Is corruption an efficient grease?," BOFIT Discussion Papers 20/2008, Bank of Finland, Institute for Economies in Transition.
  • Handle: RePEc:bof:bofitp:2008_020
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    More about this item

    Keywords

    governance; corruption; income; aggregate productivity; efficiency jel classification: c33; k4; o43; o47.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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