During the last decades, corruption became an important topic. About twenty years ago the issue started to gain increasing attention. Different Organization engage in the fight against corruption. This is a remarkable change compared to the situation before the 1990s. Back then, most people did not see it as a pressing problem. Actually, it was more seen as an integral part of doing business. Most European countries allowed for tax deductibility of bribes. Even the World Bank, not constricted by such national concerns, was avoiding the topic.
The changed perception of corruption has manifold reasons. Foremost, the geopolitical situation changed remarkably. During the cold war, governments, despite their corruptness, were supported to make sure they were not joining the communist bloc. After the end of this ideological competition, the imperative to tolerate and not to address issues like corruption and abuse of political power ceased to exist. Last, but not less important, the USA, not constraint by geopolitical considerations, had economic interest to put the topic on the agenda. While for US-companies bribing abroad was forbidden, most other developed countries used graft to initiate business abroad. Therefore, the US had a special interest to push for anti-corruption laws to level the playing field for its companies.
From a western normative and moral point of view this fight against corruption on the international level seems to be a desirable development. However, if those were the only reasons for this crusade, it could be misperceived as another example of the imposition of rules from the Global North on the Global South. Then again, if corruption has negative impacts, other than moral concerns, it would legitimize this movement. Prevailing corruption might influence the development and economic performance of a country. In today`s perception development and economic performance includes a variety of indicators, which improve people`s quality of life.
Therefore, after having narrowed the definition of corruption as it is understood within this paper, the correlation between corruption and some of those indicators will be examined. After this basic assessment, the relationship between economic growth, as one of the indicators for development, and corruption shall be illuminated closer. The question, whether there is a causal relationship and what the channels of this connection are shall be explored.
Table of Contents
- Introduction
- Definition of corruption
- The impact of corruption on development and economic performance
- The impact of corruption on growth
- The channels of transmission
- The impact of corruption on private investment
- The impact of corruption on public expenditure
- The impact of corruption on human capital accumulation
- The impact of corruption on productivity
- Conclusion
Objectives and Key Themes
This paper aims to examine the relationship between corruption and development, specifically focusing on the impact of corruption on economic performance. It explores the correlation between corruption levels and various development indicators, investigates the causal relationship between corruption and economic growth, and analyzes the transmission channels through which corruption affects development.
- The definition and scope of corruption
- The correlation between corruption and development indicators
- The impact of corruption on economic growth
- The channels through which corruption influences development
- The overall implications of corruption for economic performance and societal well-being
Chapter Summaries
Introduction: This chapter introduces the topic of corruption and its increasing prominence on national and international agendas in recent decades. It highlights the shift in perception of corruption from an accepted practice to a pressing problem, citing factors such as geopolitical shifts, citizen uprisings, increased media transparency, and the economic interests of the United States. The chapter sets the stage for exploring the potential negative impact of corruption on development and economic performance, and lays out the paper's objectives of defining corruption, examining its correlation with development indicators, and analyzing the causal relationship between corruption and economic growth.
Definition of corruption: This chapter delves into the various definitions of corruption found in the literature, noting the diverse approaches and the common inclusion of the state's role in its definition. The chapter establishes the working definition of corruption used throughout the paper, which aligns with the understanding used by institutions like the World Bank and Transparency International: "the abuse of public power for private benefit (or profit)." This precise definition provides a consistent framework for analyzing corruption's impact throughout the rest of the study.
The impact of corruption on development and economic performance: This chapter presents initial evidence suggesting a relationship between corruption and development by analyzing the correlation between the Corruption Perception Index (CPI) and various development indicators. By examining graphs showing relationships between CPI scores and GDP per capita, Gini coefficient, education expenses, and life expectancy, the chapter reveals a negative correlation between high levels of corruption and positive development indicators. While demonstrating a correlation, the chapter acknowledges this doesn't prove causality; it merely highlights a potential relationship that requires further investigation into its underlying mechanisms.
Keywords
Corruption, development, economic performance, economic growth, public sector, private investment, public expenditure, human capital, productivity, development indicators, Transparency International, Corruption Perception Index (CPI), World Bank.
Frequently Asked Questions: A Comprehensive Language Preview
What is the main topic of this paper?
The paper examines the relationship between corruption and development, focusing on how corruption impacts economic performance. It investigates the correlation between corruption levels and various development indicators, explores the causal link between corruption and economic growth, and analyzes the ways in which corruption affects development.
What are the key themes explored in the paper?
Key themes include the definition and scope of corruption, the correlation between corruption and development indicators (like GDP per capita, Gini coefficient, education expenses, and life expectancy), the impact of corruption on economic growth, the mechanisms through which corruption influences development (including its effects on private investment, public expenditure, human capital accumulation, and productivity), and the overall consequences of corruption for economic performance and societal well-being.
How is corruption defined in this paper?
The paper adopts a definition consistent with the World Bank and Transparency International: "the abuse of public power for private benefit (or profit)." The paper acknowledges the diverse definitions of corruption in the literature but uses this precise definition for consistency throughout its analysis.
What evidence is presented regarding the relationship between corruption and development?
The paper initially presents a correlation between the Corruption Perception Index (CPI) and various development indicators. Graphs illustrating relationships between CPI scores and indicators like GDP per capita, Gini coefficient, education expenses, and life expectancy reveal a negative correlation between high corruption levels and positive development outcomes. However, the paper emphasizes that correlation doesn't equal causation and further investigation is needed to understand the underlying mechanisms.
What are the transmission channels through which corruption affects development?
The paper explores several channels through which corruption influences development. These include its impact on private investment (deterring investment due to uncertainty and risk), public expenditure (leading to inefficiency and misallocation of resources), human capital accumulation (undermining education and skills development), and overall productivity (reducing efficiency and economic output).
What is the structure of the paper?
The paper is structured with an introduction, a chapter defining corruption, a chapter examining corruption's impact on development and economic performance, and a conclusion. It also includes a detailed table of contents, a section outlining objectives and key themes, and chapter summaries.
What keywords are associated with this paper?
Keywords include: Corruption, development, economic performance, economic growth, public sector, private investment, public expenditure, human capital, productivity, development indicators, Transparency International, Corruption Perception Index (CPI), World Bank.
- Quote paper
- Daniel Detzer (Author), 2010, The impact of corruption on development and economic performance, Munich, GRIN Verlag, https://www.grin.com/document/153649
