Journal Analysis

Relationship between bribery and Economic Growth-An Empirical analysis

Published in March 1st 2010

Journal Details

• Indian Journal of Economics & Business• Started in 2002.• It is published at least 2 times per year. • Double Refereed International Journal• Managed by 20+ Associate Editors & 15 +

Editorial Advisory board..

Index of the Journal

• Introduction.• Defining Bribery and Bribery in International

Business.• Review of Extant literature.• Theoretical Framework.• Data and Methodology.• Result and Analysis.• Policy and Implication Limitations.• Conclusions.

Introduction

• Focus of this paper

• If the level of bribery in a country affects the rate of its economic growth

• If the rate of economic growth in a country affects the level of bribery in that country.

Defining Bribery and Bribery in International Business

• Definition of Bribery.

• The growth in international trade and relative increase in bribery.

• Seriousness of Bribe taking has forced organizations control and discourage bribe taking

Review of Extant literature

• Determinants of bribery• Determinants of economic growth.• Formula by the World Bank

C = M + D-A-S – C for corruption, – M for monopoly, – D for discretion– A for accountability– S for salary

Theoretical Framework

• Studies unequivocally show that bribe taking is much lower in countries with high incomes.

• Prevalence of high levels of bribery retard economic growth.

• High levels of economic growth will reduce the prevalence of bribery.

• Bribery and economic growth can exist concurrently. Bribery prevents incomes from rising and rising incomes reduce the prevalence of bribery.

Data and Methodology.

• Level of bribery is measured by the Corruption Perception Index (CPI).

• Level of Economic Growth is measured by Gross Domestic Product (GDP).

• GDP was collected for 20 countries over a 12 year period from IMF.

• CPI was collected over the three years from a wide variety of sources (www.transparency.org)

Result and Analysis

• Two statistical treatments. – Two sets of regression analysis were run on each

of the two variables for country specific data and for the entire data taken together to test for two-way causality.

– In one regression, CPI was the dependent variable; in the other GDP was the dependent variable.

• Results are available in the Journal.

Policy and Implication Limitations

• Every country needs to be assessed on its own particularities for business and investment purposes

• General businesspersons may expect to encounter low levels of bribery in high income countries .

• In formulating strategies for economic growth, policy makers need to tailor them to the specific economic and social conditions of the specific country

• Even if bribery is eradicated may not be enough to stimulate higher levels of economic growth if other barriers to trade and investment are not dismantled.

• Rapid economic growth should not relax the authorities from seeking to keep bribery under control.

• The evidence is that in some cases, economic growth can lead to continued bribery.

Conclusions

• Bribery and economic growth impact each other both unidirectionaly and simultaneously

• The impact of lower levels of bribery on economic growth is stronger.

• There may not exist any relationship among these two variables in some countries.

Thank You

Questions?