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The impact of corruption on economic growth: a nonlinear evidence

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  • Mohamed Ali Trabelsi

    (University of Tunis El Manar)

Abstract

On the basis of the lubricating corruption effect hypothesis (grease-the-wheels hypothesis), the impact of corruption on growth seems ambiguous. Therefore, the question that arises is how corruption affects economic growth, to what extent corruption can be tolerated and at what threshold it has a detrimental effect on an economy. This paper examines the impact of corruption on economic growth by testing the hypothesis that the relationship between these two variables is nonlinear. Moreover, the paper assesses whether the belief that corruption has detrimental effects on the economy is always true. This paper uses a panel data of 65 countries observed over the 1987 to 2021 period. The findings indicate that corruption can have a positive effect on growth. It has been found that beyond an optimal threshold, both high and low corruption levels can decrease economic growth. Under this threshold, a moderate level of corruption is defined by the point of reversal of the curve of the marginal corruption effect on growth. Such a threshold could have advantages for economic growth.

Suggested Citation

  • Mohamed Ali Trabelsi, 2024. "The impact of corruption on economic growth: a nonlinear evidence," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 26(3), pages 953-962, December.
    • Handle: RePEc:spr:jsecdv:v:26:y:2024:i:3:d:10.1007_s40847-023-00301-9
    DOI: 10.1007/s40847-023-00301-9
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    References listed on IDEAS

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    1. Lorenzo Pellegrini & Reyer Gerlagh, 2004. "Corruption's Effect on Growth and its Transmission Channels," Kyklos, Wiley Blackwell, vol. 57(3), pages 429-456, August.
    2. Saha, Shrabani & Sen, Kunal, 2021. "The corruption–growth relationship: does the political regime matter?," Journal of Institutional Economics, Cambridge University Press, vol. 17(2), pages 243-266, April.
    3. Saha, Shrabani & Gounder, Rukmani, 2013. "Corruption and economic development nexus: Variations across income levels in a non-linear framework," Economic Modelling, Elsevier, vol. 31(C), pages 70-79.
    4. Mohammad Habibullah Pulok & Moin Uddin Ahmed, 2017. "Does corruption matter for economic development? Long run evidence from Bangladesh," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 44(3), pages 350-361, March.
    5. Chandan Sharma & Arup Mitra, 2019. "Corruption and Economic Growth: Some New Empirical Evidence from a Global Sample," Journal of International Development, John Wiley & Sons, Ltd., vol. 31(8), pages 691-719, November.
    6. Mohamed Ali Trabelsi & Hédi Trabelsi, 2020. "At what level of corruption does economic growth decrease?," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 28(4), pages 1317-1324, March.
    7. Paldam, Martin, 2002. "The cross-country pattern of corruption: economics, culture and the seesaw dynamics," European Journal of Political Economy, Elsevier, vol. 18(2), pages 215-240, June.
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    Cited by:

    1. Mohamed Ali Trabelsi, 2024. "The impact of artificial intelligence on economic development," Journal of Electronic Business & Digital Economics, Emerald Group Publishing Limited, vol. 3(2), pages 142-155, May.
    2. Yingying Shi, 2024. "Corruption, technical efficiency and total factor productivity growth: empirical evidence from China," Economic Change and Restructuring, Springer, vol. 57(6), pages 1-24, December.
    3. Yibrah Hagos Gebresilassie & Hafte Gebreselassie Gebrihet & Gabriel Temesgen Woldu, 2024. "Corruption and growth in Sub Saharan African countries: Do differences in government effectiveness matter?," Journal of Social Economics Research, Conscientia Beam, vol. 11(1), pages 45-59.
    4. Óscar Afonso & Mafalda Pinho, 2024. "Impact of inter-country corruption differences on wages and economic growth," Economic Change and Restructuring, Springer, vol. 57(2), pages 1-46, April.
    5. Pedro Bermúdez & Luis Verástegui & José Luis Nolazco & Dante A. Urbina, 2024. "Effects of Corruption and Informality on Economic Growth through Productivity," Economies, MDPI, vol. 12(10), pages 1-22, October.
    6. Stefano Lucarelli & Klodian Muço & Enzo Valentini, 2024. "Short Run and Long Run Effects of Corruption on Economic Growth: Evidence from Balkan Countries," Economies, MDPI, vol. 12(4), pages 1-27, April.
    7. Dejen Ketema Mamo & Enat Agachew Ayele & Shewafera Wondimagegnhu Teklu, 2024. "Modelling and Analysis of the Impact of Corruption on Economic Growth and Unemployment," SN Operations Research Forum, Springer, vol. 5(2), pages 1-24, June.

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    More about this item

    Keywords

    Corruption; Economic growth; Panel data: PCSE estimator;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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