IDEAS home Printed from
   My bibliography  Save this paper

Corruption and Development Indicators: An Empirical Review


  • Nelson Ramírez-Rondán

    () (Central Bank of Peru)

  • Saki Bigio

    () (New York University)


In this paper we report international evidence on the relationship between corruption and several development indicators such as economic stability, quality in educational expenditures, fiscal income, inequality, investment and economic growth. We first show how this relationship is negative by presenting simple unconditional correlations between corruption and these indicators. We then procede to quantify the effects of corruption on growth: we estimate a Dynamic Panel Data model for a sample of 80 countries and taking 1960-2000 as our sample period. Our findings suggest that in improvement in corruption indicators from levels in Latina America and Africa to developed country standards would increase output growth in 0,5% and 0,7% respectively.

Suggested Citation

  • Nelson Ramírez-Rondán & Saki Bigio, 2006. "Corruption and Development Indicators: An Empirical Review," Working Papers 2006-007, Banco Central de Reserva del Perú.
  • Handle: RePEc:rbp:wpaper:2006-007

    Download full text from publisher

    File URL:
    File Function: Application/pdf
    Download Restriction: no

    References listed on IDEAS

    1. Torsten Persson, 2002. "Do Political Institutions Shape Economic Policy?," Econometrica, Econometric Society, vol. 70(3), pages 883-905, May.
    2. Chang, Roberto & Kaltani, Linda & Loayza, Norman V., 2009. "Openness can be good for growth: The role of policy complementarities," Journal of Development Economics, Elsevier, vol. 90(1), pages 33-49, September.
    3. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 570-615, August.
    4. Shang-Jin Wei, 2000. "Natural openness and good government," Policy Research Working Paper Series 2411, The World Bank.
    5. Jakob Svensson, 2003. "Who Must Pay Bribes and How Much? Evidence from a Cross Section of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 207-230.
    6. Acemoglu, Daron & Johnson, Simon & Robinson, James & Thaicharoen, Yunyong, 2003. "Institutional causes, macroeconomic symptoms: volatility, crises and growth," Journal of Monetary Economics, Elsevier, vol. 50(1), pages 49-123, January.
    7. Chand, Sheetal K. & Moene, Karl O., 1999. "Controlling Fiscal Corruption," World Development, Elsevier, vol. 27(7), pages 1129-1140, July.
    8. Alberto Alesina & Beatrice Weder, 2002. "Do Corrupt Governments Receive Less Foreign Aid?," American Economic Review, American Economic Association, vol. 92(4), pages 1126-1137, September.
    9. Daniel Lederman & Norman V. Loayza & Rodrigo R. Soares, 2005. "Accountability And Corruption: Political Institutions Matter," Economics and Politics, Wiley Blackwell, vol. 17, pages 1-35, March.
    10. 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 222-279, April.
    11. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
    12. Islam, Roumeen, 2003. "do more transparent government govern better?," Policy Research Working Paper Series 3077, The World Bank.
    13. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    14. Joshua Aizenman & Reuven Glick, 2006. "Military expenditure, threats, and growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(2), pages 129-155.
    15. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 503-530.
    16. Gupta, Sanjeev & de Mello, Luiz & Sharan, Raju, 2001. "Corruption and military spending," European Journal of Political Economy, Elsevier, vol. 17(4), pages 749-777, November.
    17. Hindriks, Jean & Keen, Michael & Muthoo, Abhinay, 1999. "Corruption, extortion and evasion," Journal of Public Economics, Elsevier, vol. 74(3), pages 395-430, December.
    18. Fisman, Raymond & Gatti, Roberta, 2002. "Decentralization and corruption: evidence across countries," Journal of Public Economics, Elsevier, vol. 83(3), pages 325-345, March.
    19. Kaufman, Daniel & Shang-Jin Wei, 1999. "Does"grease money"speed up the wheels of commerce?," Policy Research Working Paper Series 2254, The World Bank.
    20. Isaac Ehrlich & Francis T. Lui, 1999. "Bureaucratic Corruption and Endogenous Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 270-293, December.
    21. Vito Tanzi & Hamid R Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 97/139, International Monetary Fund.
    22. Norman Loayza & Pablo Fajnzylber & César Calderón, 2005. "Economic Growth in Latin America and the Caribbean : Stylized Facts, Explanations, and Forecasts," World Bank Publications, The World Bank, number 7315.
    23. Smarzynska, Beata K. & Shang-Jin Wei, 2000. "Corruption and the composition of foreign direct investment - firm-level evidence," Policy Research Working Paper Series 2360, The World Bank.
    24. Beata K. Smarzynska & Shang-Jin Wei, 2000. "Corruption and Composition of Foreign Direct Investment: Firm-Level Evidence," NBER Working Papers 7969, National Bureau of Economic Research, Inc.
    25. Shang-Jin Wei & Yi Wu, 2002. "Negative Alchemy? Corruption, Composition of Capital Flows, and Currency Crises," NBER Chapters,in: Preventing Currency Crises in Emerging Markets, pages 461-506 National Bureau of Economic Research, Inc.
    26. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
    27. Paolo Mauro, 1996. "The Effects of Corruptionon Growth, Investment, and Government Expenditure," IMF Working Papers 96/98, International Monetary Fund.
    28. Erwin H Tiongson & Hamid R Davoodi & Sanjeev Gupta, 2000. "Corruption and the Provision of Health Care and Education Services," IMF Working Papers 00/116, International Monetary Fund.
    29. Shang-Jin Wei, 1997. "Why is Corruption So Much More Taxing Than Tax? Arbitrariness Kills," NBER Working Papers 6255, National Bureau of Economic Research, Inc.
    30. Frye, Timothy & Shleifer, Andrei, 1997. "The Invisible Hand and the Grabbing Hand," American Economic Review, American Economic Association, vol. 87(2), pages 354-358, May.
    31. Shang-Jin Wei, 2000. "Local Corruption and Global Capital Flows," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(2), pages 303-354.
    32. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    33. Jain, Arvind K, 2001. " Corruption: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 71-121, February.
    34. Sanjeev Gupta & Hamid Davoodi & Rosa Alonso-Terme, 2002. "Does corruption affect income inequality and poverty?," Economics of Governance, Springer, vol. 3(1), pages 23-45, March.
    35. Vito Tanzi & Hamid R Davoodi, 2000. "Corruption, Growth, and Public Finances," IMF Working Papers 00/182, International Monetary Fund.
    36. Alesina, Alberto & Özler, Sule & Roubini, Nouriel & Swagel, Phillip, 1996. "Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    37. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Bureaucratic corruption and the rate of temptation: do wages in the civil service affect corruption, and by how much?," Journal of Development Economics, Elsevier, vol. 65(2), pages 307-331, August.
    38. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
    39. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
    40. Vito Tanzi, 1994. "Corruption, Governmental Activities, and Markets," IMF Working Papers 94/99, International Monetary Fund.
    41. Islam, Roumeen & Montenegro, Claudio E., 2002. "What determines the quality of institutions?," Policy Research Working Paper Series 2764, The World Bank.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Corruption; Development; Growth;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rbp:wpaper:2006-007. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Research Unit). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.