The Effect of Corruption on Economic Growth

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Economic growth
The effect of corruption on economic growth has been extensively researched in the last two decades. While not denying that corruption may have played a positive role at particular times in specific countries, it leads to lower growth, hampering both private and productive government spending in investments and inhibiting the efficiency of public services. Corruption can also affect the growth rate through distortions in tax collection, the level of public expenditure and the composition of government expenditure. It is suggest that corrupt government officials may come to prefer the types of expenditure that allow them to collect bribes and to keep them hidden and it is also suggest that large expenditures on specialized items such missiles and bridges, whose exact market value is difficult to determine provide more opportunities for corruption. It is certainly likely to be easier to collect substantial bribes on the high technology component or infrastructure projects than on teacher's salaries. For example, the limited competition in sector may lead to a relatively high level of informal contracts and to rent-seeking activities, providing fertile ground for the growth of corrupt practices and so increase the cost of military activities, encourage rent seeking in the military sector and crowd out productive investment in the private sector. In other areas, such as health, the picture is less clear-cut: opportunities to collect bribes may be abundant in the procurement of hospital buildings but more limited in the payment of doctors' and nurses' salaries. Corruption increases the proportion of military spending in GDP and total government spending, more so than in the case of education and health.

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The economic effects of corruption can be categorized as minor and major. However, both in one way or the other have serious impact on the individual community and country. First and foremost, corruption leads to the...
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