Business Corruption and Economic Prosperity
33 Pages Posted: 18 Jul 2017 Last revised: 27 Aug 2017
Date Written: August 26, 2017
Prior literature shows government corruption mostly hurts poorer economies, whereas recent events, including the 2008 US economic crisis, suggest business corruption may harm growth in wealthier economies. Using multi-national surveys in which citizens communicated their perceptions of corruption levels for both the private and the public sectors, we examine the extent of business corruption relative to government corruption in countries, and its relation to economic prosperity. We find that citizens of wealthier countries report higher business corruption than citizens of poor countries, and relatively lower government corruption. Business corruption is evidently a greater concern to citizens of wealthier countries. Furthermore, we find that an increase in perceived business corruption is associated with a decrease in income per capita mainly in wealthy countries. In wealthier economies, business trust has a larger role, and perceived business corruption has a stronger effect on growth. Finally, our evidence suggests an increase in perceived business corruption leads to increase in regulation, and the marginal effect of the regulation on growth is positive.
Keywords: Business corruption, economic prosperity, corruption perceptions, regulation
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