The Effect of Corruption on the Growth of the Iran's Economy: A Talent Allocation Approach

Abstract

There are numerous and conflicting views on the impact of corruption on economic growth. A number of humanities scholars have described corruption as a good phenomenon and called it the grease wheel of the economy, and they believe that financial corruption improves the weak economic institutions, and by that means, the growth rate of the economy will increase. On the other hand, other humanities scholars have pointed to the undesirable nature of corruption, calling it the sand of the wheel of the economy and they have argued that corruption erodes economic growth by making the administrative process sluggish, costly and inefficient and shifting scarce resources to non-productive activities. This paper studies the impact of corruption on the growth of the Iranian economy from 1983 to 2014 by using the talent allocation approach and by applying the econometric method of equation system. The divergence in talent allocation has slowed the growth of the Iranian economy in those years.

Keywords

• corruption
• economic growth
• human capital
• talent allocation
• models with simultaneous equations