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The Relationship between Corruption and Economic Development

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  1. Introduction
  2. A regression model
  3. Major criticism of regression analysis
  4. Sources
  5. Extra credit

Through the quantitative comparison of corruption and economic development, it can be found that GDP per Capita is partially dependent on the amount of corruption within the governing body of a given nation. The independent variable (x) is the Corruption Perceptions Index (CPI) as made available by the Transparency International (TI) website. The CPI ranks a country according to the degree by which corruption exists in the public sector. TI defines corruption as the abuse of public office for private gain. Additionally, ?the surveys used in compiling the CPI ask questions that relate to the misuse of public power for private benefit.? It is a reliable measurement tool and has been used as the basis for several scholarly works and studies.1 Variable (y), GDP per Capita (converted to US Dollars and not adjusted for the purchasing power parity), is a useful indicator of average living standards and is used by the United Nations and the World Bank to extensively compare the average living standards in various countries.2

[...] Corruption may tempt government officials to choose government expenditures less on the basis of public welfare than on the opportunity they provide for extorting bribes A regression model better explains this theoretical relationship between corruption and the way it effects economic development. In this CPI model, a scale between 0-10 is used to express corruption being the least corrupt and zero being most corrupt. This scale accounts for countries with low per capita GDP and high CPI scores. As for the analysis countries were randomly selected6 in each of the three human development categories: Low, Medium, and High using table 14 in the Global Human Development Indicators 2005 publishing (thus producing 30 samples). [...]


[...] http://www.transparency.org/cpi/2005/cpi2005_faq.en.html#four 2 From the Frasier Institute website, last updated: October http://oldfraser.lexi.net/publications/critical_issues/1998/living_standards /big_picture.html 3 From TI website, Robin Hodess, Global Corruption Report 2005 pg http://www.globalcorruptionreport.org/download.html 4 From the World Bank Website, page developed by Stefanie Teggemann, Last updated on March http://www1.worldbank.org/publicsector/anticorrupt/ 5 From the IMF website, Worry About Corruption?? by Paulo Mauro copyright 1997. http://www.imf.org/external/index.htm 6 Using the random number generator at the following website: http://www.randomizer.org/form.htm 7 http://hdr.undp.org/statistics/data/indicators.cfm?x=133&y=1&z=1 Results of multiple regression for GDP per Capita in US $ Summary measures ANOVA Table Source df SS MS F p-value Regression coefficients Coefficien Std Err t-value p-valu Lower Upper t e limit limit Index Coefficient Standard t Stat P-value s Error GDP Life per Capita Predicted Expectancy thousands Capita PI Regression ) Korea GDP: Extra Credit As another means to understanding the analyzed variable, I added the education index, based on literacy and educational enrollment one being the highest zero being the lowest, one of the three indices involved in the HDI. [...]

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