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Globalization, (fighting) corruption and development: how are these phenomena linearly and nonlinearly related in wealth effects?

  • Simplice A, Asongu

Purpose – Is globalization instrumental in fighting corruption? Do wealth effects matter in this fight? Are findings valid when linearity assumptions are dropped? This paper assesses the Lalountas et al.(2011) hypotheses in the African context. Design/methodology/approach – Though not form, yet in substance the intuition and motivation are compatible with those of Lalountas et al.(2011). Four hypotheses are tested from different methodological and contextual standpoints. In the analysis, while the economic and social dimensions of globalization are reflected in the HDI, the political dimension is captured by good governance indicators. A TSLS-IV estimation technique is applied where-in globalization instruments of trade and financial liberalization are instrumented on human-development and government-quality to account for corruption (corruption-control) effects. Thus the intuition is assessing how globalization is instrumental in the fight against corruption through human development(economic and social dimensions) and government quality(political dimension). Findings – Hypothesis 1: Globalization is a powerful tool in fighting corruption (True). Hypothesis 2: Globalization is an important tool in fighting corruption only in Middle and High income countries(Partially True). Hypothesis 3: For Low income countries globalization has no significant impact on corruption(True). Hypothesis 4: Hypotheses 1 and 2 are valid only under linearity(False). Social Implications – In countries with high levels of per capita, emphasis is placed on the political and social dimensions of globalization and as a result the effects of this phenomenon on corruption-control are significant. Conversely, in nations with low levels of per capita income, emphasis is given to the economic dimension of international integration and as a result the effect of globalization on corruption is limited. As a policy implication, persistent globalization as an effective means to reduce corruption in developing countries might lead to inappropriate policies in low income countries. Originality/value – This paper has tested the Lalountas et al.(2011) hypotheses in the continent where concerns of globalization, human development and corruption are most acute.

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File URL: http://mpra.ub.uni-muenchen.de/36899/1/MPRA_paper_36899.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36899.

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Date of creation: 24 Feb 2012
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Handle: RePEc:pra:mprapa:36899
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  1. Asongu Simplice, 2011. "Law, Democracy and the Quality of Government in Africa," Working Papers 11/018, African Governance and Development Institute..
  2. Simplice A, Asongu, 2012. "Globalization and Africa: implications for human development," MPRA Paper 36541, University Library of Munich, Germany.
  3. Simplice A, Asongu, 2012. "The political economy of development assistance: peril to government quality dynamics in Africa," MPRA Paper 36543, University Library of Munich, Germany.
  4. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
  5. Simplice A, Asongu, 2012. "Reversed Economics and Inhumanity of Development Assistance in Africa," MPRA Paper 36542, University Library of Munich, Germany.
  6. 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.
  7. Greenwood, J. & Jovanovic, B., 1990. "Financial Development, Growth, And The Distribution Of Income," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9002, University of Western Ontario, The Centre for the Study of International Economic Relations.
  8. Bonaglia, Federico & Braga de Macedo, Jorge & Bussolo, Maurizio, 2001. "How Globalization Improves Governance," CEPR Discussion Papers 2992, C.E.P.R. Discussion Papers.
  9. Toke Aidt & Jayasri Dutta & Vania Sena, 2006. "Governance Regimes, Corruption and Growth: Theory and Evidence," Discussion Papers 15_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  10. Iwasaki, Ichiro & Suzuki, Taku, 2012. "The determinants of corruption in transition economies," Economics Letters, Elsevier, vol. 114(1), pages 54-60.
  11. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
  12. Billger, Sherrilyn M. & Goel, Rajeev K., 2009. "Do existing corruption levels matter in controlling corruption?: Cross-country quantile regression estimates," Journal of Development Economics, Elsevier, vol. 90(2), pages 299-305, November.
  13. Gatti, Roberta, 1999. "Corruption and trade tariffs, or a case for uniform tariffs," Policy Research Working Paper Series 2216, The World Bank.
  14. Pan-Long Tsai, 1995. "Foreign direct investment and income inequality: Further evidence," World Development, Elsevier, vol. 23(3), pages 469-483, March.
  15. Okada, Keisuke & Samreth, Sovannroeun, 2011. "The effect of foreign aid on corruption: A quantile regression approach," MPRA Paper 27969, University Library of Munich, Germany.
  16. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
  17. Simplice A, Asongu, 2011. "Law, democracy and the quality of government in Africa," MPRA Paper 35502, University Library of Munich, Germany.
  18. Okada, Keisuke & Samreth, Sovannroeun, 2012. "The effect of foreign aid on corruption: A quantile regression approach," Economics Letters, Elsevier, vol. 115(2), pages 240-243.
  19. Lalountas, Dionisios A. & Manolas, George A. & Vavouras, Ioannis S., 2011. "Corruption, globalization and development: How are these three phenomena related?," Journal of Policy Modeling, Elsevier, vol. 33(4), pages 636-648, July.
  20. Basu, Parantap & Guariglia, Alessandra, 2007. "Foreign Direct Investment, inequality, and growth," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 824-839, December.
  21. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
  22. M. Sirgy & Dong-Jin Lee & Chad Miller & James Littlefield, 2004. "The Impact of Globalization on a Country's Quality of Life: Toward an Integrated Model," Social Indicators Research, Springer, vol. 68(3), pages 251-298, September.
  23. J. Bhagwati & T. N. Srinivasan, 1979. "Revenue-Seeking: A Generalization of the Theory of Tariffs," Working papers 243, Massachusetts Institute of Technology (MIT), Department of Economics.
  24. Hisako Kai & Shigeyuki Hamori, 2009. "Globalization, financial depth, and inequality in Sub-Saharan Africa," Economics Bulletin, AccessEcon, vol. 29(3), pages 2025-2037.
  25. Asongu Simplice, 2012. "On the effect of foreign aid on corruption," Working Papers 12/031, African Governance and Development Institute..
  26. Asongu Simplice, 2012. "The political economy of development assistance: peril to government quality dynamics in Africa," Working Papers 12/008, African Governance and Development Institute..
  27. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
  28. Asongu Simplice, 2012. "Reversed Economics and Inhumanity of Development Assistance in Africa," Working Papers 12/034, African Governance and Development Institute..
  29. Asongu Simplice, 2011. "Finance and Inequality: Exploring Pro-Poor Investment Channels in Africa," Working Papers 11/016, African Governance and Development Institute..
  30. Simplice A., Asongu, 2011. "Finance and inequality: exploring pro-poor investment channels in Africa," MPRA Paper 34994, University Library of Munich, Germany.
  31. Asongu Simplice, 2012. "Globalization and Africa: implications for human development," Working Papers 12/022, African Governance and Development Institute..
  32. Simplice A, Asongu, 2012. "On the effect of foreign aid on corruption," MPRA Paper 36545, University Library of Munich, Germany.
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