Corruption and Levels of Economic Development: A Cross-Country Assessment with Special Reference to Africa

Abstract

Cross-country studies of corruption have reported a negative relationship between corruption and economic development. Yet the causal direction is unclear. We posit that the relationship between corruption and economic development is innately interdependent or bidirectional because they coevolve within a country. Moreover, corruption and economic development interact with governance, culture, and social development, forming an interdependent system of quintuple helix. We examine these factors with a sample of 157 countries, as well as a subsample of 46 African countries. The results indicate that as countries move away from a factor-driven economy towards an innovation-driven economy, they observe lower levels of perceived corruption. However, the relationship between actual incidence of corruption and economic development is highly sensitive to covariates in governance, culture, and social development, consistent with interdependence among these factors. The factor that consistently explains perceived and actual corruption is a country’s governance systems, measured by institutions or press freedom.