The effect of corruption control on efficiency spillovers

Abstract

We examine the effect of corruption control on efficiency and its implications for efficiency spillovers by a stochastic frontier model. Our dataset covers 102 countries from 1996 to 2014. We find a positive relationship between corruption control and efficiency. If neighboring countries have difficulty in handling corruption, the country would be negatively affected by its neighbors' corruption through efficiency spillovers. We then compare the efficiency differences across countries for three time periods: 1996-2002, 2002-2008, and 2008-2014. On average, technical efficiencies slightly increased in the second period compared to the first period. In the third period, the efficiencies declined, particularly in China.