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INSTITUTIONS’ IMPACT ON THE CORRUPTION–GROWTH NEXUS: NONLINEARITIES AND TRANSMISSION CHANNELS

Published online by Cambridge University Press:  30 July 2019

Réda Marakbi
Affiliation:
University of Orléans
Camélia Turcu*
Affiliation:
University of Orléans
Patrick Villieu
Affiliation:
University of Orléans
*
Address correspondence to: Camélia Turcu, University of Orléans, Laboratoire d’Économie d’Orléans (LEO) CNRS, Rue de Blois, 45067 Orleans, France. e-mail: camelia.turcu@univ-orleans.fr. Phone: 0033688421354

Abstract

We analyze the channels through which institutional quality can impact the corruption–growth nexus. To do this, we develop an endogenous growth model and test its implications empirically, through panel data models using GMM and PSTR settings. Our sample consists of 136 developed and developing countries analyzed over the period 1984–2015. We show, both theoretically and empirically, that (i) the corruption–growth relation can be subject to nonlinearities highly influenced by countries’ institutional development; and (ii) private investment and public spending are two main channels through which institutional quality affects, positively or negatively, the relation between corruption and economic growth.

Type
Articles
Copyright
© Cambridge University Press 2019

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Footnotes

We would like to thank participants at the INFER/HeU Workshop on Applied Macroeconomics for insightful comments on a previous version of the paper. Many thanks to Ekrame Boubtane, Elena Dumitrescu, Makram El-Shagi, Jarko Fidrmuc, Pierre-Guillaume Meon, Kiril Tochkov, and to an anonymous referee for the constructive remarks and suggestions that helped us to improve the paper. All remaining errors are ours.

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