Abstract

This article analyzes for a sample of 110 countries between 2006-2016, the relationship between cor-ruption, investment and growth. Using the Panel Smooth Transition Regression (PSTR), results show that there is a non-linearity between growth and investment which depends on the level of corruption, characterized by a smooth transition between the two extreme regimes. More precisely, the results ob-tained suggest that the sensitivity of growth to investment is higher in countries with a low degree of corruption. By elsewhere we also find a positive direct impact of the corruption on growth.

Keywords: growth, investment, corruption, panel smooth threshold regression.

JEL Classification: E22, G11, O16, O55.

Cite as: Nguedie, Y. H. N. (2018). Corruption, Investment and Economic Growth in Developing Countries: A Panel Smooth Transition Regression Approach. SocioEconomic Challenges, 2(1), 63-68. DOI: 10.21272/sec.2(1).63-68.2018

References

1. Acemoglu, Daron, Johnson, Simon and Robinson, James A. (2004). Institutions as the Fundamental Cause of Long-Run Growth. CEPR Discussion Papers, No. 4458.
2. Barro, Robert J. nd Sala-i-Martin, Xavier (2004). Economic Growth, Second edition.
3. Barro, Robert J. (1990). Government Spending in a Simple Model of Endogenous Growth. Journal of Political Economy, University of Chicago Press, 98(5), 103-126.
4. Ben Salem Melika and Perraudin Corinne (2001). Tests de linéarité, spécification et estimation de modèles à seuil: une analyse comparée des méthodes de Tsay et de Hansen. Économie et Prévision, 148, 157-176.
5. Burguet R. and Y.-K. Che (2004). Competitive Procurement with Corruption. Rand Journal of Economics, 33(1), 50-68.
6. Caner, Mehmet, and Hansen Bruce, E. (2004). Instrumental Variable Estimation of a Threshold Model. Econometric Theory, 20(5), 813-843. 7.
7. Colletaz, Gilbert and Hurlin, Christophe (2006). Treshold Effects of the Public Capital Productivity: an International Panel Smooth Transition Approach. LEO, Université d’Orléans, Working Paper.
8. Collier, P. (2000). How to Reduce Corruption. African Development Review, 12(2), 191-205.
9. Davies, Robert (1987). Hypothesis Testing When a Nuisance Parameter is Present Only Under the Alternative. Biometrika, 74, 33-34.
10. Fedeli, S. and Forte, F. (2003). Public Co-financing of Private Sector’s Investments: Subsidiarity and Corruption. Public Choice, 116(1-2), 109-145.
11. Fouquau, Julien, Hurlin, Christophe and Rabaud, Isabelle (2008). The Feldstein-Horioka Puzzle: a Panel Smooth Transition Regression Approach. Economic Modelling, 25(2), 284-299.
12. González Andrés, Teräsvirta Timo et van Dijk Dick (2005). Panel smooth Transition regression Models. Working Paper Series in Economics and Finance, No. 604, Stockholm School of Economics.
13. Granger, Clive W.J. and Teräsvirta, Timo (1993). Modelling nonlinear economic relationships. Oxford University Press.
14. Gyimah-Brempong, K. (2002). Corruption, Economic Growth and Income Inequality in Africa. Economics of Governance, 3(3), 183-209.
15. Habib, M. et Zurawicki, L. (2002). Corruption and Foreign Direct Investment. Journal of International Business Studies, 33(2), 291-307.
16. Hansen, Bruce E. (1999). The treshold effects in non-dynamic panel : estimation, testing and inference. Journal of Econometrics, 93, 345-368
17. Hope, K.R. and Chikulo, B.C. (2000). Corruption and Development in Africa: Lessons from Country Case Studies. Palgrave.
18. Knack, S. (2003). Democracy, governance and growth. Ann Arbor: University of Michigan Press.
19. Larrain, B.F. and Tavares, J. (2004). Does Foreign Direct Investment Decrease Corruption? Cuadernos de Economia, 41(123), 217-230.
20. Lucas, Robert (1998). On the Mechanics of Economic Development. Journal of Monetary Economics, 22(1), 3-42.
21. Mauro, Paolo (1995). Corruption and growth. Quarterly Journal of Economics, 110(3), 681-712.
22. Mauro, Paolo (2004). The Persistance of Corruption and Slow Economic Growth. IMF Staff Papers, 51(1), 1-18.
23. Minea, A. and Villieu, P. (2008). Un réexamen de la relation non linéaire entre déficits budgétaires et croissance économique. Revue Economique, 59, 561-570.
24. Minier, Jenny (2007). Nonlinearities and Robustness in Growth Regressions. American Economic Review, 97(2), 388-392.
25. OCDE (2007). Les indicateurs de gouvernance: usages et abus. Etudes du Centre de Développement, No. 11.
26. Pellegrini, Lorenzo, and Gerlagh, Reyer (2004). Corruption’s Effect on Growth and Its Transmission Channels. Kyklos, 57(3), 429-456.
27. Romer, Paul M. (1990). Are Non convexities Important for Understanding Growth? American Economic Review, 80(2), 97-103.
28. Sarkar, H.H. and Aynul, M. (2001). Impact of Corruption on the Efficiency of Investment: Evidence from A Cross-Country Analysis. Asia-Pacific Development Journal, 8(2), 111-116.
29. Solow, Robert M. (1956). A Contribution to the Theory of Economic Growth. Quarterly Journal of Economics, 70, 65-94.
30. Swaleheen, Mush and Stansel, Dean (2007). Economic Freedom, Corruption, and Growth. Cato Journal, 27(3), 343-358.