How Bad is Corruption? Cross-country Evidence of the Impact of Corruption on Economic Prosperity

TY - JOUR

T1 - How Bad is Corruption?

T2 - Cross-country Evidence of the Impact of Corruption on Economic Prosperity

AU - Bentzen, Jeanet Sinding

PY - 2012/2

Y1 - 2012/2

N2 - Most people today would argue that corruption is bad for countries' economic development. Yet, we still lack a reliable empirical estimate of the effect. This study addresses the econometric shortcomings of the literature and provides an estimate of the causal impact of corruption on gross domestic product per capita across countries. Certain dimensions of a country's culture are used as instruments for corruption. These instruments stay strong when the other deep determinants of economic development, geography, and the remaining dimensions of institutions and culture are controlled for. In the process of choosing controls, however, the entire set of variables available in the Quality of Governance online database (QOG) that includes all central variables from the literature on institutions and culture are included. It is found that corruption does exert a significant and negative impact on countries' productivity levels.

AB - Most people today would argue that corruption is bad for countries' economic development. Yet, we still lack a reliable empirical estimate of the effect. This study addresses the econometric shortcomings of the literature and provides an estimate of the causal impact of corruption on gross domestic product per capita across countries. Certain dimensions of a country's culture are used as instruments for corruption. These instruments stay strong when the other deep determinants of economic development, geography, and the remaining dimensions of institutions and culture are controlled for. In the process of choosing controls, however, the entire set of variables available in the Quality of Governance online database (QOG) that includes all central variables from the literature on institutions and culture are included. It is found that corruption does exert a significant and negative impact on countries' productivity levels.

U2 - 10.1111/j.1467-9361.2011.00653.x

DO - 10.1111/j.1467-9361.2011.00653.x

M3 - Journal article

SN - 1363-6669

VL - 16

SP - 164

EP - 187

JO - Review of Development Economics

JF - Review of Development Economics

IS - 1

ER -