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Mary Adenle
University of Wisconsin - Whitewater

Subject Listing - Economics
Advisor: Prof. Mark Skidmore

Friday, Oral Session 5, Presentation 4, Karpen Hall 005

CORRUPTION AND ECONOMIC ACTIVITY

The purpose of this project is to examine the effects of corruption on economic activity. Corruption threatens growth and stability of a nation by discouraging business activity, thereby undermining legal notions of property rights. This in turn deters investment and other economic activity. Corruption, as defined by Transparency International, is the "abuse of public office for private gain." Transparency International developed a Corruption Perception Index for many countries over time. This index measures the degree to which corruption is perceived to exist among a country`s public officials and politicians. A higher corruption index signifies a lower level of corruption and vice versa. Given that corruption is detrimental to the property rights of citizens in a nation, there may be negative effects on economic development. Specifically, I test the hypotheses that economic growth, international trade, and investment will be reduced in the presence of corruption. Preliminary multiple regression analysis on a sample of 80 countries shows a negative correlation between corruption and economic growth. Controlling for openness, initial income levels, population, and secondary schooling, results show that corruption significantly reduces the rate growth. Further analysis will reveal the routes by which corruption deters growth. I will also empirically examine the relationships between corruption and trade activity as well as investment.

Advisor: Prof. Mark Skidmore, Associate Professor and Chair, Economics Department, University of Wisconsin - Whitewater, Whitewater, WI