## Corruption, Public Investment, and Growth

_IMF Working Papers, October 1, 1997_

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## Bibliographic details
- Authors: Vito Tanzi, Hamid R Davoodi
- Published: October 1, 1997
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451929515.001

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### Summary findings
- 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.
- Evidence 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.
- Implication: Economists should be more restrained in their praise of high public sector investment, especially in countries with high corruption.

### Evidence and channels
- Corruption affects public investment at multiple stages of decision-making and implementation.
- Weaker auditing institutions amplify distortions caused by corruption.
- The net effect observed is higher levels of public investment but lower productivity and quality of the resulting infrastructure.
- Channels identified that link corruption to lower growth include reduced government revenues, underinvestment in operations and maintenance, and lower infrastructure quality.

### Policy implications and recommendations
- Exercise caution in advocating high public sector investment without accounting for the level of corruption and strength of auditing institutions.
- Strengthening auditing institutions could reduce the degree of distortion in public investment decisions.
- Improving governance and reducing political (“grand”) corruption can help ensure public investment translates into productive infrastructure and growth.

### Publication and metadata
- Title: Corruption, Public Investment, and Growth
- Authors: Vito Tanzi, Hamid R Davoodi
- Date: October 1, 1997
- Series: Working Paper No. 1997/139
- Issue: 139
- Volume: 1997
- Pages: 23
- DOI: https://doi.org/10.5089/9781451929515.001
- Stock No: WPIEA1391997
- ISBN: 9781451929515
- ISSN: 1018-5941
- Subjects: 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
- Related note: IMF eLibrary offers over 25,000 IMF publications in multiple formats.

*Source: "Corruption, Public Investment, and Growth", IMF Working Papers, Vito Tanzi and Hamid R Davoodi, October 1, 1997.*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/corruption-public-investment-and-growth-2353_