Corruption and Development: A Test for Non-Linearities
University of Nottingham Research Paper No. 2005/25
27 Pages Posted: 6 Dec 2005
Date Written: 2005
Using different combinations of culture, development and openness to international trade, we test the variability in the incidences of corruption at different stages of development or in other words the non-linearities in the relationship between corruption and development. We employ formal threshold model developed by Hansen (2000), and unlike the existing literature, we find that: (1) non-linear models that search for the break points in the relationship between corruption and development are statistically preferable than linear regressions; (2) the effect of development at any stage is much lower than that has been suggested by studies using linear regressions approach; (3) both culture and openness do not affect corruption directly; rather they have an effect on the location of break points in the relationship between corruption and development.
Keywords: Corruption, Development, Culture, Openness, Non-linearity
JEL Classification: D73, H26, O11
Suggested Citation: Suggested Citation