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How Does Corruption Affect Public Debt? An Empirical Analysis

  • Arusha Cooray
  • Friedrich Schneider

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.

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File URL: http://www.econ.jku.at/papers/2013/wp1322.pdf
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Paper provided by Department of Economics, Johannes Kepler University Linz, Austria in its series Economics working papers with number 2013-22.

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Length: 30 pages
Date of creation: Dec 2013
Date of revision:
Handle: RePEc:jku:econwp:2013_22
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Web page: http://www.econ.jku.at/

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  1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(1), pages 222-79, April.
  2. Eugen Dimant & Tim Krieger & Daniel Meierrieks, 2013. "The effect of corruption on migration,1985--2000," Applied Economics Letters, Taylor & Francis Journals, vol. 20(13), pages 1270-1274, September.
  3. Axel Dreher & Friedrich Schneider, 2006. "Corruption and the Shadow Economy: An Empirical Analysis," KOF Working papers 06-123, KOF Swiss Economic Institute, ETH Zurich.
  4. Pierre-Guillaume Méon & Khalid Sekkat, 2005. "Does corruption grease or sand the wheels of growth?," Public Choice, Springer, vol. 122(1), pages 69-97, January.
  5. Jay Pil Choi & Marcel Thum, 2002. "Corruption and the Shadow Economy," CESifo Working Paper Series 633, CESifo Group Munich.
  6. International Monetary Fund, 2000. "Corruption and Military Spending," IMF Working Papers 00/23, International Monetary Fund.
  7. Mendez, Fabio & Sepulveda, Facundo, 2006. "Corruption, growth and political regimes: Cross country evidence," European Journal of Political Economy, Elsevier, vol. 22(1), pages 82-98, March.
  8. Al-Marhubi, Fahim A., 2000. "Corruption and inflation," Economics Letters, Elsevier, vol. 66(2), pages 199-202, February.
  9. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
  10. repec:pdn:wpaper:71 is not listed on IDEAS
  11. Toke S. Aidt, 2003. "Economic analysis of corruption: a survey," Economic Journal, Royal Economic Society, vol. 113(491), pages F632-F652, November.
  12. Friedman, Eric & Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 2000. "Dodging the grabbing hand: the determinants of unofficial activity in 69 countries," Journal of Public Economics, Elsevier, vol. 76(3), pages 459-493, June.
  13. Mo, Pak Hung, 2001. "Corruption and Economic Growth," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 66-79, March.
  14. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  15. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  16. Johnson, Simon & Kaufmann, Daniel & Zoido-Lobaton, Pablo, 1998. "Regulatory Discretion and the Unofficial Economy," American Economic Review, American Economic Association, vol. 88(2), pages 387-92, May.
  17. Eugen Dimant & Tim Krieger & Margarete Redlin, 2013. "A Crook is a Crook … But is He Still a Crook Abroad? - On the Effect of Immigration on Destination-Country Corruption," Working Papers CIE 71, University of Paderborn, CIE Center for International Economics.
  18. Craig Depken & Courtney Lafountain, 2006. "Fiscal consequences of public corruption: Empirical evidence from state bond ratings," Public Choice, Springer, vol. 126(1), pages 75-85, January.
  19. Vito Tanzi, 1998. "Corruption Around the World; Causes, Consequences, Scope, and Cures," IMF Working Papers 98/63, International Monetary Fund.
  20. Brunetti, Aymo & Kisunko, Gregory & Weder, Beatrice, 1998. "Credibility of Rules and Economic Growth: Evidence from a Worldwide Survey of the Private Sector," World Bank Economic Review, World Bank Group, vol. 12(3), pages 353-84, September.
  21. Clara Delavallade, 2006. "Corruption and distribution of public spending in developing countries," Journal of Economics and Finance, Springer, vol. 30(2), pages 222-239, June.
  22. Reinhart, Carmen & Rogoff, Kenneth, 2010. "Debt and Growth Revisited," MPRA Paper 24376, University Library of Munich, Germany.
  23. Johann Graf Lambsdorff, 2003. "How Corruption Affects Productivity," Kyklos, Wiley Blackwell, vol. 56(4), pages 457-474, November.
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