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Short-run and Long-run Effects of Corruption on Economic Growth: Evidence from State-Level Cross-Section Data for the United States


  • Nobuo Akai

    (School of Business Administration, University of Hyogo)

  • Yusaku Horiuchi

    (Asia Pacific School of Economics and Government, Australian National University)

  • Masayo Sakata

    (Faculty of Politics, Economics and Law, Osaka International University)


Theoretical studies suggest that corruption may counteract government failure and promote economic growth in the short run, given exogenously determined suboptimal bureaucratic rules and regulations. As the government failure is itself a function of corruption, however, corruption should have detrimental effects on economic growth in the long run. In this paper, we measure the rate of economic growth for various time spans - short (1998?2000), middle (1995-2000) and long (1991-2000) - using previously uninvestigated state-level cross-section data for the United States. Our two-stage least square (2SLS) estimates with a carefully selected set of instruments show that the effect of corruption on economic growth is indeed negative and statistically significant in the middle and long spans but insignificant in the short span.

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  • Nobuo Akai & Yusaku Horiuchi & Masayo Sakata, 2005. "Short-run and Long-run Effects of Corruption on Economic Growth: Evidence from State-Level Cross-Section Data for the United States," CIRJE F-Series CIRJE-F-348, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2005cf348

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    Cited by:

    1. Dridi, Mohamed, 2013. "Corruption and Economic Growth: The Transmission Channels," MPRA Paper 47873, University Library of Munich, Germany.
    2. Ahmet Faruk Aysan & …mer Faruk Baykal & Marie-Ange Véganzonès–Varoudakis, 2011. "The Effects of Convergence in Governance on Capital Accumulation in the Black Sea Economic Cooperation Countries," Chapters,in: Does Economic Governance Matter?, chapter 6 Edward Elgar Publishing.
    3. Egunjobi T. Adenike, 2013. "An econometric analysis of the impact of Corruption on economic growth in Nigeria," E3 Journal of Business Management and Economics., E3 Journals, vol. 4(3), pages 054-065.
    4. Naved Ahmad & Salman Arjumand, 2016. "Impact of corruption on GDP per capita through international migration: an empirical investigation," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(4), pages 1633-1643, July.
    5. Pushkarev, Oleg, 2007. "Corruption and Economic Development of Russia: A Regional Aspect," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 6(2), pages 81-94.
    6. Andreas Assiotis & Kevin Sylwester, 2013. "Do the effects of corruption upon growth differ between democracies and autocracies?," University of Cyprus Working Papers in Economics 06-2013, University of Cyprus Department of Economics.
    7. Hakimi, Abdelaziz & Hamdi, Helmi, 2015. "How Corruption affect Growth in MENA region? Fresh Evidence from a Panel Cointegration Analysis," MPRA Paper 63750, University Library of Munich, Germany.
    8. Craigwell, Roland & Wright, Allan S, 2011. "Foreign Direct Investment and Corruption in Developing Economies: Evidence form Linear and Non-Linear Panel Causality Tests," MPRA Paper 40933, University Library of Munich, Germany.
    9. Gregory Brock & Constantin Ogloblin, 2014. "Another look at technical efficiency in American states, 1979–2000," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(2), pages 577-590, September.
    10. Pedro C. Magalhães & Luís Aguiar-Conraria, 2017. "Procedural Fairness and Economic Voting," NIPE Working Papers 07/2017, NIPE - Universidade do Minho.
    11. Biru Paksha Paul, 2010. "Does corruption foster growth in Bangladesh?," International Journal of Development Issues, Emerald Group Publishing, vol. 9(3), pages 246-262, September.
    12. Maria Amin & Adeel Ahmed & Khalid Zaman, 2013. "The Relationship Between Corruption And Economic Growth In Pakistan — Looking Beyound The Incumbent," Oeconomics of Knowledge, Saphira Publishing House, vol. 5(3), pages 15-45, July.
    13. Aliyu, Shehu Usman Rano & Elijah, Akanni Oludele, 2008. "Corruption and Economic Growth in Nigeria: 1986 -2007," MPRA Paper 12504, University Library of Munich, Germany, revised 07 Dec 2008.
    14. Ambar, Rabnawaz, 2015. "Corruption, Inequality and Economic Growth," MPRA Paper 70375, University Library of Munich, Germany, revised 2015.
    15. Kodila Tedika, Oasis, 2012. "Consequences De La Corruption : Panorama Empirique
      [Consequences of Corruption : Empirical survey]
      ," MPRA Paper 41482, University Library of Munich, Germany.

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    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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