Corruption and Economic Growth: An Empirical Study in 12 Countries

Abstract

The impact of corruption on economic growth receives excellent attention in empirical studies. Understanding the relationships between corruption concerning the economy is essential to ensure stable economic development. This research article aims to investigate the relationship between corruption and economic growth in 12 countries over 26 years from 1995 to 2020. This research article examines this relationship in the context of the panel data framework. Panel unit root, panel cointegration tests, panel Dynamic Ordinary Least Squares (DOLS) estimation, and panel Vector Error Correction Model (VECM) methodology associated with the Wald test is applied, respectively. The results show that corruption generates a negative effect on economic growth. In other words, a 1 percent rise in the transparency level (low corruption) will enhance the real GDP growth by 0.20 percent in the long run. Short-run and long-run causality runs from corruption to GDP and both variables are cointegrated. The results conclude that lowering the corruption rate is the precondition for continued growth.