Corruption is a symptom and an outcome of institutional weakness, with potentially adverse effects on a country’s economic performance. In the last two decades, a wide range of scholars, policy makers and practitioners have expressed concerns that corruption has gone hand-in-hand with extensive liberalisation reforms and led to poor economic outcomes, including slow growth and high levels of growth volatility. This systematic review aims to provide comparable, reliable and verifiable estimates of the effect of corruption on economic growth by controlling for study heterogeneity in terms of growth measures, data sources and country groupings.
Despite a residual risk of within-study dependence, the statistical significance of the estimated effect sizes suggests that there is a prima facie case for anti-corruption policy interventions in both low-income and mixed countries. However, economic gains from reducing corruption in low-income countries can be increased if anti-corruption interventions are combined with a wider set of policies aimed at improving institutional quality and providing correct incentives for investment in human capital. This systematic review also indicates that levels of corruption in LICs may be higher than in non-LICs, but the latter stand to gain more from reducing the incidence of corruption. With respect to implications for future research, we report that innovation is both necessary and feasible with respect to construction of better corruption data, estimation of indirect effects of corruption on growth, and addressing multicollinearity problems in cross-section or panel-data estimations.
EPPI-Centre, Social Science Research Unit, Institute of Education, University of London, ISBN: 978-1-907345-21-0, 134 pp.