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Government spending, corruption and economic growth

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  • d'Agostino, Giorgio
  • Dunne, Paul J.
  • Pieroni, Luca

Abstract

This paper considers the effects of corruption and government spending on economic growth. It starts from an endogenous growth model and extends it to account for the detrimental effects of corruption on the potentially productive components of government spending, namely military and investment spending. The resulting model is estimated on a sample of African countries and the results show, first, that the growth rate is strongly influenced by the interaction between corruption and military burden, with the interaction between corruption and government investment expenditure having a weaker effect. Second, allowing for the cyclical economic fluctuations in specific countries leaves the estimated elasticities close to those of the full sample. Third, there are significant conditioning variables that need to be taken into account, namely the form of government, political instability and natural resource endowment. These illustrate the cross country heterogeneity when accounting for quantitative direct and indirect effects of key variables on economic growth. Overall, these findings suggest important policy implications.

Suggested Citation

  • d'Agostino, Giorgio & Dunne, Paul J. & Pieroni, Luca, 2012. "Government spending, corruption and economic growth," MPRA Paper 38109, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:38109
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Gasto gubernamental, corrupción y crecimiento económico
      by in Tiempo Económico on 2012-05-02 21:49:54

    Citations

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    Cited by:

    1. Ryan A. Compton & Bryan Paterson, 2016. "Military Spending and Growth: The Role of Institutions," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(3), pages 301-322, June.
    2. Sorin-Daniel, MANOLE & Raluca, Erdniç, 2014. "Assessing The Impact Of Corruption Upon The Romanian Economy," Management Strategies Journal, Constantin Brancoveanu University, vol. 24(2), pages 4-11.
    3. Giorgio d’Agostino & J. Paul Dunne & Luca Pieroni, 2017. "Does Military Spending Matter for Long-run Growth?," Defence and Peace Economics, Taylor & Francis Journals, vol. 28(4), pages 429-436, July.
    4. 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.
    5. d'Agostino, Giorgio & Scarlato, Margherita, 2016. "Institutions, Innovation and Economic Growth in European Countries," MPRA Paper 72427, University Library of Munich, Germany.
    6. Günther G. Schulze & Nikita Zakharov, 2018. "Corruption in Russia - Historic Legacy and Systemic Nature," CESifo Working Paper Series 6864, CESifo Group Munich.
    7. El Hamma Imad, 2017. "Do political institutions improve the effect of remittances on economic growth? Evidence from South-Mediterranean countries," Post-Print halshs-01655347, HAL.
    8. d'Agostino, Giorgio & Dunne, John Paul & Pieroni, Luca, 2013. "Military Expenditure, Endogeneity and Economic Growth," MPRA Paper 45640, University Library of Munich, Germany.
    9. Fernando Delbianco & Carlos Dabús & María angeles Caraballo pou, 2016. "Growth, Inequality and Corruption: Evidence from Developing Countries," Economics Bulletin, AccessEcon, vol. 36(3), pages 1811-1820.
    10. repec:eee:wdevel:v:103:y:2018:i:c:p:323-335 is not listed on IDEAS
    11. repec:eur:ejesjr:178 is not listed on IDEAS
    12. Trabelsi, Mohamed Ali & Trabelsi, Hédi, 2014. "At what level of corruption does economic growth decrease?," MPRA Paper 81279, University Library of Munich, Germany.
    13. repec:eee:wdevel:v:99:y:2017:i:c:p:60-74 is not listed on IDEAS
    14. repec:ebl:ecbull:eb-17-00318 is not listed on IDEAS

    More about this item

    Keywords

    corruption; military spending; development economics; panel data; Africa;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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