Corruption, governance, investment and growth in emerging markets

Abstract

The article investigates the potential impact of corruption on economic growth by examining the effect that corruption may have on several significant determinants of economic growth, namely, investment in human, private and public capital, and on governance. Our theoretical approach allows for corruption to influence economic growth directly and indirectly through different investment and governance channels. All previous empirical work on this issue has been based on national income and product accounts (NIPA) data, which do not normally break down gross domestic investment into its private and public sector, and if they do, they misclassify investment by public enterprises as private investment, potentially biasing empirical findings. In this article we use a data set from the International Finance Corporation that bypasses these problems. We find that the impact of corruption on the level of public investment appears to be more ambiguous than it has been found in the previous literature. We, however, find that the impact of corruption on the accumulation of private capital is significantly more damaging than what has been previously found. We also find that the impact of corruption on governance is unambiguously negative, which further deters economic growth.

Corruption and Economic Freedom Links to Public Finance and Investment in New EU Members

“…Můžeme se tedy jen domnívat, že za tímto zjištěním stojí lepší správa veřejných výdajů. Everhart, Martinez-Vazquez a McNab (2009) na základě své analýzy tvrdí, že dopad korupce na veřejné investice je méně jednoznačný, než se dosud v literatuře uvádělo. Z tohoto důvodu nejsou naše závěry odlišné od závěrů z jiných zemí.…”

Determinants of firms’ investment behaviour: a multilevel approach

“…If 'bad' institutions are a source of uncertainty, a weak institutional development will negatively influence firms' choice to invest and possibly also firms' investment level. In fact, the macroeconomic literature concludes that favourable institutions and political stability are positively related to a country's level of (foreign and domestic) investment (Everhart et al, 2009;Daude and Stein, 2007;Acemoglu and Johnson, 2005;Mauro, 1995).…”

“…An extensive macroeconomic literature suggests a strong relation between institutions and political stability and investment (e.g. Everhart et al, 2009;Acemoglu and Johnson, 2005;Mauro, 1995). We assess the relative impact of these and other macroeconomic factors on both the likelihood of investment and on firms' investment to sales ratio.…”

Corruption and positive selection in privatization

“…Empirically, the question whether corruption greases or sands the wheels of the economy is not settled: despite many found a negative effect of corruption on important macroeconomic variables such as growth, GDP per capita, FDI and others (as surveyed in Bardhan, 1997), recent results show that the economic effects are ambiguous (de Vaal and Ebben, 2011;Dreher and Herzfeld, 2005;Dong and Torgler, 2010;Everhart et al, 2009;Halkos and Tzeremes, 2010).…”