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Corruption Governance

topic v1.0.0 2026-04-05 Agent-extracted

How corruption affects economic development, foreign investment, public service delivery, and institutional trust across countries worldwide.

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Domain: Corruption and Governance Quality

How corruption affects economic development, foreign investment, public service delivery, and institutional trust

Period: 1995-present Population: Countries worldwide Level: macro

Overview

6
Constructs
8
Findings
3
Engines

Constructs

corruption_perception_index Corruption Perception Index

Transparency International's composite index measuring perceived levels of public sector corruption across countries, scored 0-100 where higher values indicate less corruption

government_effectiveness_score Government Effectiveness Score

World Governance Indicators measure of the quality of public services, civil service independence from political pressures, quality of policy formulation and implementation

regulatory_quality_score Regulatory Quality Score

World Governance Indicators measure of government ability to formulate and implement sound policies and regulations that permit and promote private sector development

fdi_inflows_gdp FDI Inflows as Percent of GDP

Net inflows of foreign direct investment as a percentage of gross domestic product, measuring international investor confidence and capital attraction

bribery_incidence_rate Bribery Incidence Rate

Percentage of firms or individuals reporting having paid a bribe to a public official in the past year, measuring direct corruption experience rather than perception

public_trust_government Public Trust in Government

Survey-based measure of citizen confidence in national government institutions, typically measured as percentage expressing trust or confidence in government

Findings

1 SD improvement in corruption index associated with +4 pp investment rate and +0.5 pp annual growth.

Direction: negative Confidence: strong Method: OLS and IV, N~67

Corruption negatively affects investment as a share of GDP. A one-standard-deviation decrease in corruption is associated with an increase in the investment rate of over 4 percentage points.

Direction: negative Confidence: strong Effect: Ī²ā‰ˆ-0.3 to -0.9 depending on specification; 1 SD corruption reduction ā†’ +4pp investment/GDP Method: OLS and IV using ethno-linguistic fractionalization as instrument, Nā‰ˆ67 countries

Corruption negatively affects economic growth both directly and indirectly through reduced investment. The relationship is robust to controlling for political instability and other institutional variables.

Direction: negative Confidence: moderate Effect: Significant negative effect on growth, robust across specifications Method: OLS and IV, cross-country regression

Ethno-linguistic fractionalization serves as a valid instrument for corruption, establishing a causal channel from bureaucratic inefficiency to lower investment and growth.

Direction: positive Confidence: moderate Effect: IV estimates confirm and strengthen OLS findings Method: IV/2SLS with ethno-linguistic fractionalization instrument

Corruption is negatively associated with GDP growth rate, with approximately 0.5 percentage point decrease in growth per standard deviation increase in corruption index

Direction: negative Confidence: moderate Method: ols_regression

High corruption reduces FDI inflows by an amount equivalent to raising the tax rate by more than 20 percentage points, demonstrating corruption acts as a significant tax on foreign investment

Direction: negative Confidence: strong Method: instrumental_variables

Government effectiveness is positively associated with public service delivery quality across all country income groups, with stronger effects in developing countries

Direction: positive Confidence: strong Method: correlation_matrix

Regulatory quality is positively associated with new business formation rates and private sector development indicators across countries

Direction: positive Confidence: moderate Method: ols_regression

Engines

ols_regression correlation_matrix instrumental_variables

Sources

Mauro, Paolo (1995). Corruption and Growth
Kaufmann, D., Kraay, A., Mastruzzi, M. (2010). The Worldwide Governance Indicators: Methodology and Analytical Issues DOI
Wei, S.-J. (2000). How Taxing is Corruption on International Investors? DOI
Svensson, J. (2005). Eight Questions about Corruption DOI

Tags

topiccorruption-governance

Details

Domain: Corruption and Governance Quality

How corruption affects economic development, foreign investment, public service delivery, and institutional trust

Temporal scope: 1995-present | Population: Countries worldwide

Key Findings

  • 1 SD improvement in corruption index associated with +4 pp investment rate and +0.5 pp annual growth. (negative, strong)
  • Corruption negatively affects investment as a share of GDP. A one-standard-deviation decrease in corruption is associated with an increase in the investment rate of over 4 percentage points. (negative, strong)
  • Corruption negatively affects economic growth both directly and indirectly through reduced investment. The relationship is robust to controlling for political instability and other institutional variables. (negative, moderate)
  • Ethno-linguistic fractionalization serves as a valid instrument for corruption, establishing a causal channel from bureaucratic inefficiency to lower investment and growth. (positive, moderate)
  • Corruption is negatively associated with GDP growth rate, with approximately 0.5 percentage point decrease in growth per standard deviation increase in corruption index (negative, moderate)
  • High corruption reduces FDI inflows by an amount equivalent to raising the tax rate by more than 20 percentage points, demonstrating corruption acts as a significant tax on foreign investment (negative, strong)
  • Government effectiveness is positively associated with public service delivery quality across all country income groups, with stronger effects in developing countries (positive, strong)
  • Regulatory quality is positively associated with new business formation rates and private sector development indicators across countries (positive, moderate)

Installation

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