The Impact of Corruption on Economic Growth in Low-Income Countries: (An Empirical Analysis Using the Kuznets Hypothesis) | ||||
| Journal of Advances in Economics and Business Studies | ||||
| Volume 2, Issue 1, April 2025, Page 60-80 PDF (455.37 K) | ||||
| Document Type: Original Article | ||||
| DOI: 10.21608/jaebs.2025.424640 | ||||
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| Abstract | ||||
| Purpose: This study explores the impact of corruption on economic growth in low-income countries (LICs) by applying the Kuznets hypothesis as a novel methodological approach to examine this relationship. Design/methodology/approach: Using panel data for 29 LICs from 1996 to 2018, the study employs multiple econometric techniques including panel unit root tests, Granger causality tests, panel EGLS with fixed effects, and an adaptation of the Kuznets curve hypothesis. This comprehensive approach allows for analysis of both short-term and long-term effects, as well as the potential non-linear relationship between corruption and growth. Findings: The results reveal that corruption has a significant negative impact on economic growth in LICs. Specifically, a one-unit increase in corruption is associated with a 0.98% decrease in economic growth after an 8-year lag. Moreover, the study finds evidence of an inverted U-shaped relationship between corruption and economic growth, consistent with the Kuznets hypothesis. Corruption exhibits diminishing returns, increasing initially with economic growth until a threshold of approximately 10% growth is reached, after which it begins to decrease. Implications: These findings suggest that anti-corruption efforts in LICs may not yield immediate results, but are crucial for long-term economic development. The non-linear relationship implies that as LICs develop, they may experience an initial increase in corruption before seeing improvements. This underscores the need for sustained anti-corruption efforts throughout the development process. Originality/value: This paper contributes to the literature by focusing specifically on LICs, utilizing a long-term panel dataset, and introducing the Kuznets hypothesis as a new methodological framework to examine the dynamic relationship between corruption and economic growth over time. | ||||
| Keywords | ||||
| Corruption; Kuznets Hypothesis; Governance; Long-Run Analysis; Econometric Analysis; VAR; Panel EGLS; Granger Causality | ||||
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