Common wisdom is that corruption hampers economic development by casting “sand in the wheels”, but some economists still claim that corruption may slip “grease in the wheels” if governance is badly malfunctioning. This paper investigates the dilemma in a non-linear growth model with 99 countries worldwide over 2006–2014. The empirical results show that the quality of governance is generally negatively correlated with GDP per capita growth but that the role of corruption in this context remains mixed. The main finding is that if governance is labeled by deficiencies in Government effectiveness, Regulatory quality or Rule of law, corruption tends to mitigate their negative growth effects. Thus, the results indicate notable support for the grease in the wheels hypothesis.
|Journal||Journal of Development Economics and Finance - Open Access Journal|
|Publication status||Published - 5 Jun 2021|
|Publication type||A1 Journal article-refereed|
- development; governance; growth; infrastructures; investments.
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