Institutions and the Relation between Corruption and Economic Growth

16 Pages Posted: 24 Jan 2011

See all articles by Albert de Vaal

Albert de Vaal

Radboud University Nijmegen - Department of Economics

Wouter Ebben

affiliation not provided to SSRN

Date Written: January 13, 2011

Abstract

We study the effects of bureaucratic corruption on economic growth in a framework that takes into account that corruption also affects growth through its impact on institutions. We use a formal growth framework in which corruption affects growth negatively because of individual rent-seeking and stealing of public goods, but where corruption may serve a positive role by taking over the role of institutions. We find that the overall effect of corruption on economic growth is highly dependent on the institutional setting of a country. Particularly in situations where institutions are not well developed corruption may be conducive to economic growth. We also find that the interaction among institutions themselves matters. This underscores the importance of taking into account the complete institutional setting when studying corruption, both in theory as well as empirically.

Suggested Citation

de Vaal, Albert and Ebben, Wouter, Institutions and the Relation between Corruption and Economic Growth (January 13, 2011). Review of Development Economics, Vol. 15, Issue 1, pp. 108-123, 2011. Available at SSRN: https://ssrn.com/abstract=1745785 or http://dx.doi.org/10.1111/j.1467-9361.2010.00596.x

Albert De Vaal (Contact Author)

Radboud University Nijmegen - Department of Economics ( email )

Nijmegen, 6500 HK
Netherlands

Wouter Ebben

affiliation not provided to SSRN

No Address Available

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