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How Does Corruption Affect Public Debt? An Empirical Analysis

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  • Arusha Cooray
  • Friedrich Schneider

Abstract

This paper examines the relationship between corruption and public debt in 106 countries. Results suggest that corruption leads to an increase in public debt. We also investigate if the effect of corruption on pblic debt is increased by government expenditure, the shadow economy and military expenditure. We find that the effect of corruption on public debt is compounded by increased government expenditure and increased size of the shadow economy.

Suggested Citation

  • Arusha Cooray & Friedrich Schneider, 2013. "How Does Corruption Affect Public Debt? An Empirical Analysis," Economics working papers 2013-22, Department of Economics, Johannes Kepler University Linz, Austria.
  • Handle: RePEc:jku:econwp:2013_22
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Crisi e corruzione in Italia
      by Alberto Bagnai in Goofynomics on 2014-06-17 21:57:00

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    Cited by:

    1. repec:nam:befdwp:10 is not listed on IDEAS
    2. Petra Koudelkova & Wadim Strielkowski & Denisa Hejlova, 2015. "Corruption and System Change in the Czech Republic: Firm-level Evidence," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 25-46, March.
    3. Ernesto Crivelli & Sanjeev Gupta & Carlos Mulas-Granados & Carolina Correa-Caro, 2016. "Fragmented Politics and Public Debt," IMF Working Papers 16/190, International Monetary Fund.
    4. Keita Kouramoudou, 2017. "Does Corruption Affect Total Factor Productivity? An Empirical Analysis," Working Papers 1714, University of Tampere, School of Management, Economics.
    5. Eunji Kim & Yoonhee Ha & Sangheon Kim, 2017. "Public Debt, Corruption and Sustainable Economic Growth," Sustainability, MDPI, Open Access Journal, vol. 9(3), pages 1-30, March.
    6. Uchenna EFOBI & Ibukun BEECROFT & Simplice ASONGU, 2014. "Foreign Aid and Corruption: Clarifying Murky Empirical Conclusions," Working Papers 14/025, African Governance and Development Institute..
    7. repec:taf:intecj:v:31:y:2017:i:3:p:415-435 is not listed on IDEAS
    8. Mustafa ÜNVER & Julide Yalçýnkaya KOYUNCU, 2016. "The Impact of Poverty on Corruption," Journal of Economics Library, KSP Journals, vol. 3(4), pages 632-642, December.
    9. Jozef Pacolet & Joris Vanormelingen, 2015. "Illicit Financial Flows: concepts and first macro estimates for Belgium and its 18 preferred partner countries," BeFinD Working Papers 0110, University of Namur, Department of Economics.

    More about this item

    Keywords

    corruption; public debt; government expenditure; shadow economy; military expenditure;

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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