Corruption and Economic Growth: New Empirical Evidence

38 Pages Posted: 14 Oct 2019

See all articles by Klaus Gründler

Klaus Gründler

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Niklas Potrafke

CESifo (Center for Economic Studies and Ifo Institute)

Date Written: 2019

Abstract

The nexus between corruption and economic growth has been examined for a long time. Many empirical studies measured corruption by the reversed Transparency International's Perception of Corruption Index (CPI) and ignored that the CPI was not comparable over time. The CPI is comparable over time since the year 2012. We employ new data for 175 countries over the period 2012-2018 and re-examine the nexus between corruption and economic growth. The cumulative long-run effect of corruption on growth is that real per capita GDP decreased by around 17% when the reversed CPI increased by one standard deviation. The effect of corruption on economic growth is especially pronounced in autocracies and transmits to growth by decreasing FDI and increasing inflation.

Keywords: perceived corruption, economic growth, panel data

JEL Classification: C230, H110, K400, O110

Suggested Citation

Gründler, Klaus and Potrafke, Niklas, Corruption and Economic Growth: New Empirical Evidence (2019). CESifo Working Paper No. 7816, Available at SSRN: https://ssrn.com/abstract=3467949

Klaus Gründler (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Niklas Potrafke

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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