Corruption And Its Effect On Economic Growth

1487 WordsMar 23, 20166 Pages
In this essay, I will present an argument against theories that propose that corruption may be beneficial to economic growth by presenting theoretical and empirical evidence that suggest otherwise. I will also discuss policies that will prove effective in eliminating corruption in developing countries. The international handbook on the economics of corruption defines corruption as the use of public resources to fund the private purposes. It usually involves the abuse of official power. Economic growth can be defined as increase in a country’s ability to produce output over a period of time (Investopedia, 2005). Although the consensus view in economic theory is that corruption has a negative impact on economic growth, there are instances where having a corrupt government has actually encouraged growth. These are instances where corruption is “economically expansionary Osterfeld (1992) . Leff (1964), has argued that some underdeveloped countries with a high level of bureaucracy and weak governance have been able to allocate resources more efficiently because of corrupt government officials. He argues that is because entrepreneurs and potential investors can sidestep the tremendous bureaucracy in these countries through the use of bribery (Leff, 1964). The Chinese economy in the 1980’s supports this theory because corruption acted as a means to “legalise enterprises” prior to Deng’s economic reforms. (Reyes, 2015). However both theoretical and empirical studies have
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