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How does corruption affect sustainable development? A threshold non-linear analysis

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  • Fhima, Fredj
  • Nouira, Ridha
  • Sekkat, Khalid

Abstract

This paper investigates the impact of corruption on sustainable development using the Seo and Shin (2016) threshold model for a panel data set of 96 to 103 developed and developing countries from 1996 to 2019. The paper contributes to the ongoing debate about whether corruption greases or sands the wheels of sustainable development. All results support the hypothesis of the existence of thresholds. Examining the full sample, the impact of corruption on sustainable development is regime-specific and dependent on the quality of governance. In developed countries, corruption always hinders sustainable development, while in developing countries the impact of corruption on sustainable development is regime-specific and dependent on the quality of governance. When the quality of governance is low, highly corrupt countries achieve higher levels of sustainable development, which is consistent with the “grease the wheels” hypothesis.

Suggested Citation

  • Fhima, Fredj & Nouira, Ridha & Sekkat, Khalid, 2023. "How does corruption affect sustainable development? A threshold non-linear analysis," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 505-523.
    • Handle: RePEc:eee:ecanpo:v:78:y:2023:i:c:p:505-523
    DOI: 10.1016/j.eap.2023.03.020
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    More about this item

    Keywords

    Corruption; Governance; Sustainable development; Threshold models;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • G3 - Financial Economics - - Corporate Finance and Governance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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