Premium
How Bad is Corruption? Cross‐country Evidence of the Impact of Corruption on Economic Prosperity
Author(s) -
Bentzen Jeanet Sinding
Publication year - 2012
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2011.00653.x
Subject(s) - language change , prosperity , gross domestic product , economics , per capita , corporate governance , empirical evidence , productivity , developing country , development economics , fractionalization , macroeconomics , economic growth , political science , finance , art , literature , population , philosophy , demography , epistemology , ethnic group , sociology , law
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.