Short-run and Long-run Effects of Corruption on Economic Growth: Evidence from State-Level Cross-Section Data for the United States

Nobuo Akai (), Yusaku Horiuchi and Masayo Sakata

International and Development Economics Working Papers from International and Development Economics

Abstract: Theoretical studies suggest that corruption may counteract government failure and promote economic growth in the short run, given exogenously determined sub optimal bureaucratic rules and regulations. As the government failure is itself a function of corruption, however, corruption should have detrimental effects on economic growth in the long run. In this paper, we measure the rate of economic growth for various time spans—short (1998–2000), middle (1995–2000) and long (1991–2000)—using previously uninvestigated state-level cross-section data for the United States. Our two-stage least square (2SLS) estimates with a carefully selected set of instruments show that the effect of corruption on economic growth is indeed negative and statistically significant in the middle and long spans but insignificant in the short span.

JEL-codes: D73 O40 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2005
New Economics Papers: this item is included in nep-geo and nep-reg
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Citations: View citations in EconPapers (24)

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Working Paper: Short-run and Long-run Effects of Corruption on Economic Growth: Evidence from State-Level Cross-Section Data for the United States (2005)
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