Do high relative perceptions of corruption lead to lower levels and rates of investment?
Date
2007-10
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Abstract
This paper is an attempt to measure the effect of corruption on domestic investment relative to other investment determinants and to test the robustness of that effect. It builds upon the cross-country empirical study by Mauro (1995) on corruption and economic growth and updates it by focusing on the effect of corruption perceptions on investment decisions alone, and by examining any change on the corruption-perceptions effect among different country-income and regional groups. This paper finds that, controlling for government policy, initial output conditions and labor-force quality in 47 countries, low corruption perceptions retain a significant impact on investment levels as a proportion of gross domestic product for all countries. The impact is magnified in low-income countries.
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Keywords
Corruption, Politics, Investment, Investment rates, Corruption perceptions