Corruption and Development Indicators: An Empirical Review

In this paper we report international evidence on the relationship between corruption and several development indicators such as economic stability, quality in educational expenditures, fiscal income, inequality, investment and economic growth. We first show how this relationship is negative by presenting simple unconditional correlations between corruption and these indicators. We then procede to quantify the effects of corruption on growth: we estimate a Dynamic Panel Data model for a sample of 80 countries and taking 1960-2000 as our sample period. Our findings suggest that in improvement in corruption indicators from levels in Latina America and Africa to developed country standards would increase output growth in 0,5% and 0,7% respectively.