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The Economic Costs of Corruption: A Survey and New Evidence

Author

Listed:
  • Axel Dreher

    (Thurgau Institute of Economics & University of Konstanz)

  • Thomas Herzfeld

    (Department of Agricultural Economics, University of Kiel)

Abstract

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$.

Suggested Citation

  • Axel Dreher & Thomas Herzfeld, 2005. "The Economic Costs of Corruption: A Survey and New Evidence," Public Economics 0506001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwppe:0506001
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    References listed on IDEAS

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    More about this item

    Keywords

    Costs of Corruption; Survey; Empirical Evidence;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • K49 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Other
    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other

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