Control of corruption, international investment, and economic growth – Evidence from panel data

摘要

Highlights?In the theoretical model corruption hampers investment and growth through uncertainty.?Our empirical results confirm that corruption hinders growth by limiting investment.?International financing access makes countries less prone to the effects of corruption.In this paper we study the effects of corruption using an open economy version of the endogenous growth model with international capital mobility. In particular, the model predicts that corruption negatively affects the stock of international investment in the host country. In addition, the model predicts that growth should be impaired by the uncertainty caused by corruption. Bribes, unlike taxes, involve unpredictable distortion in the discretionary and uncertain use of the government power. This results in additional costs to businesses and alongside with resources allocated to unproductive activities impose an extra burden on the economy. We test empirically the predictions of the theory using a sample of 142 countries for the period 1994–2014 and GMM methods. Using indicators of control of corruption from the World Bank, the lack of corruption is found to have a positive and statistically significant effect on the growth rate of real per capital GDP and increased the investment ratio. Hence, the empirical results suggest that corruption directly hinders economic growth by hampering investment. The estimated effects are robust to changes in specifications and estimation methods. Thus, it can be concluded that richer countries with better access to international financing should be growing faster and be less prone to the adverse effects of corruption than the emerging economies.