Corruption and Economic Development: A Comparative Analysis with Evidence from the Extended Solow Growth Model

Abstract

The impact of corruption on economic development diverges on two paths: whether it boosts the economy or acts as a hindrance to economic growth. This study is an effort to determine which of these paths corruption follows in both OECD and emerging Asian economies by using panel data from 1996-2020 for a total of 45 countries. In addition, it analyzes the impact of human capital and economic globalization on the economic growth of these countries. In this study, an extended Solow Growth Model is estimated by using the panel ARDL approach. The results indicate that corruption has a negative while human capital positively impacts economic growth in both regions. However, in the case of economic globalization, the impact is positive in OECD countries and proves insignificant for emerging Asian economies. These findings confirm that corruption acts as an obstacle to economic development; thus, this study suggests a need to enhance education and health, especially for emerging Asian economies.