IMF Working Papers

Corruption, Public Investment, and Growth

By Vito Tanzi, Hamid R Davoodi

October 1, 1997

Download PDF

Preview Citation

Format: Chicago

Vito Tanzi, and Hamid R Davoodi. Corruption, Public Investment, and Growth, (USA: International Monetary Fund, 1997) accessed October 13, 2024
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.

Subject: Capital spending, Corruption, Crime, Current spending, Expenditure, Infrastructure, National accounts, Public investment spending

Keywords: Capital, Capital spending, Corruption, Corruption index, Corruption-investment relationship, Current spending, GDP, Global, Government revenue-GDP ratio, Growth, Infrastructure, Infrastructure investment, Investment, Investment budget, Productivity, Public investment, Public investment spending, Spending, WP

Publication Details

  • Pages:

    23

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1997/139

  • Stock No:

    WPIEA1391997

  • ISBN:

    9781451929515

  • ISSN:

    1018-5941