Corruption, quality of institutions and growth

Abstract

Purpose: This paper aims to apply regression-tree analysis to capture the nonlinear effects of corruption on economic growth. Using data of 103 countries for the period 1996–2017, the authors endogenously detect two distinct areas in corruption quality in which the members share the same model of economic growth. Design/methodology/approach: The authors apply regression tree analysis to capture the nonlinearity of the influences. This methodology allows us to split endogenously the whole sample of countries and characterize the different ways through which corruption impacts economic growth in each group of countries. Findings: The traditional determinants of economic growth have different impacts on countries depending on their level of corruption, which, in turn, confirms the parameter heterogeneity of the Solow model found in other strands of the literature. Originality/value: The authors apply a new approach to a worldwide sample obtaining novel results.