Does Corruption Have Any Impacts on Economic Growth

statistics-1445457_640There have been various studies that have been done to determine whether corruption has any effects on economic growth. Most research carried out by international organizations such as the World Bank claim that corruption hampers economic growth.

According to World Bank, countries that have a high level of corruption have very low average income. In addition, the infant mortality rate is these countries are about three times higher. Also, the literacy rate is about 25 percent lower.

Corruption affects resource allocation in two main ways. First, it can change private investor’s valuation of the relative advantages of various investments. For instance, corruption induced change affect prices of goods as well as factors of production. Second, corruption can cause misallocation of resources when decisions of who invest, where to invest and when to invest public funds are made by corrupt government departments.

Corruption in the way contracts is awarded, economic activities are carried out, and deals are made, leads to oligopolies or monopolies in the economy. Those people who use their money or connections to bribe government officers can market mechanisms and policies to ensure they are dominating a particular market.

Other negative effects of corruption include uneven distribution of wealth, low motivation for technology advancement, and low attractiveness for foreign investors and low-quality healthcare provision

References

https://www.weforum.org/agenda/2015/05/how-does-corruption-affect-economic-growth/

http://www.scielo.cl/scielo.php?script=sci_arttext&pid=S0719-04332012000200005

http://www.investopedia.com/articles/03/042303.asp

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