Faslnāmah-i Pizhūhish/Nāmah-i Iqtisādī (Dec 2014)
An Investigation of Corruption and Economic Growth Nexus: Some Evidence from D-8 Countries
Abstract
This study investigates the potential threshold effects in the relationship between corruption control index and GDP growth for the D-8 countries with the presence of other variables, including education expenditures, government consumption expenditures, agricultural raw materials exports, inflation rate, and index of openness over the period 1996-2011. For this purpose, the paper uses a Panel Smooth Transition Regression (PSTR) model that is an appropriate method for explaining cross-country heterogeneity. Our result rejects the linearity hypothesis, and gives a threshold at corruption control of -0.862. Based on this threshold, we can build a two-regime model. In the first regime, corruption control, education expenditures, agricultural raw materials exports and index of openness variables have a significantly positive impact on GDP growth and government consumption expenditures and inflation rate variables have a significantly negative impact on GDP growth. In the second regime, however, corruption control, education expenditures, agricultural raw materials exports and index of openness variables have a positive impact and government consumption expenditures and inflation rate variables have a negative impact on GDP growth. Though, the impact of corruption control, education expenditures, agricultural raw materials exports and index of openness are increased and the impact of government consumption expenditures and inflation rate are dramatically declined.
