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The Economic Costs of Corruption: A Survey and New Evidence

  • Axel Dreher

    (Thurgau Institute of Economics & University of Konstanz)

  • Thomas Herzfeld

    (Department of Agricultural Economics, University of Kiel)

This paper reviews the empirical literature on the economic costs of corruption. Corruption affects economic growth, the level of GDP per capita, investment activity, international trade and price stability negatively. Additionally, it biases the composition of government expenditures. The second part of the paper estimates the effect of corruption on economic growth and GDP per capita as well as on six possible transmission channels. The results of this analysis allows to calculate the total effect of corruption: An increase of corruption by about one index point reduces GDP growth by 0.13 percentage points and GDP per capita by 425 US$.

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Paper provided by EconWPA in its series Public Economics with number 0506001.

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Date of creation: 02 Jun 2005
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Handle: RePEc:wpa:wuwppe:0506001
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