How Bad is Corruption? Cross‐Country Evidence of the Impact of Corruption on Economic Prosperity

18 Pages Posted: 17 Jan 2012

See all articles by Jeanet Sinding Bentzen

Jeanet Sinding Bentzen

University of Copenhagen - Department of Economics

Date Written: February 2012

Abstract

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.

Suggested Citation

Bentzen, Jeanet, How Bad is Corruption? Cross‐Country Evidence of the Impact of Corruption on Economic Prosperity (February 2012). Review of Development Economics, Vol. 16, Issue 1, pp. 167-184, 2012. Available at SSRN: https://ssrn.com/abstract=1986580 or http://dx.doi.org/10.1111/j.1467-9361.2011.00653.x

Jeanet Bentzen (Contact Author)

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

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