Corruption and economic growth

This study introduces a new perspective on the role of corruption in econom ic, growth and provides quantitative estimates of the impact of corruption on the growth and importance of the transmission channels. In our ordinary least squares estimations, we find that a 1% increase in the corruption lev el reduces the growth rats by about 0.72% or, expressed differently, a one- unit increase in the corruption index reduces the growth rate by 0.545 perc entage points. The most important channel through which corruption affects economic growth is political instability, which accounts for about 53% of t he total effect. We also find that corruption reduces the level of human ca pital and the share of private investment. J. Comp. Econ., March 2001, 29(1 ), pp. 66-79. School of Business, Hong Kong Baptist University, Kowloon Ton g, Hong Kong. (C). 2001 Academic Press.