Corruption, Growth and Political Regimes: Cross Country Evidence

Abstract

This paper studies the effects of corruption on long run growth incorporating measures of political freedom as a key determinant of the relationship. Unlike previous empirical studies, we find evidence of a non-monotonic relationship between corruption and growth after controlling for several other economic variables and restricting the sample to those countries considered to be free. Our results indicate that the growth-maximizing level of corruption is significantly greater than zero, with corruption beneficial for economic growth at low levels of incidence and detrimental at high levels of incidence.

Keywords: corruption, growth