Corruption, Public Investment, and Growth

Author/Editor:

Vito Tanzi ; Hamid R Davoodi

Publication Date:

October 1, 1997

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Corruption, particularly political or “grand” corruption, distorts the entire decision-making process connected with public investment projects. The degree of distortions is higher with weaker auditing institutions. The evidence presented shows that higher corruption is associated with (i) higher public investment; (ii) lower government revenues; (iii) lower expenditures on operations and maintenance; and (iv) lower quality of public infrastructure. The evidence also shows that corruption increases public investment while reducing its productivity. These are five channels through which corruption lowers growth. An implication is that economists should be more restrained in their praise of high public sector investment, especially in countries with high corruption.

Series:

Working Paper No. 1997/139

Subject:

Capital spending Corruption Crime Current spending Expenditure Infrastructure National accounts Public investment spending

English

Publication Date:

October 1, 1997

ISBN/ISSN:

9781451929515/1018-5941

Stock No:

WPIEA1391997

Pages:

23

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