A Parametric Debate of Corruption and Economic Growth in Sub-Saharan African Countries

Abstract

This paper investigates the determinants of corruption and its impact on economic growth in 39 sub-Saharan African countries. The significance of this study would be to add to extant literature on causes of corruption in sub-Saharan African countries and the results obtain could further raise cautions about casual attempts at institutional reform. In an attempt to empirically investigate on corruption, the corruption index was obtained from the Worldwide Governance Indicators (WGI) and data for the study span from 1996 to 2011. In a Barro-styled economic growth model, the dynamic panel regressions were conducted for both corruption determinants and growth-corruption models. Panel unit root test following lm, Pesaran and Shin W-Stats, Model reliability tests and cointegration test were also conducted. From the model to find the determinants of corruption, empirical result suggests that natural resource (ore, fuel, food and Agriculture), rule of law, secondary school enrollment and foreign direct investment are relevant in explaining spate of corruption. Corruption was important in explaining GDP per capita. Overall, our result suggests that natural resource wealth, irrespective of the types (whether ores, fuel, food and agriculture) tends to consolidate and conserve bad political regimes which undermines appropriate social-cultural changes that in turn breeds corruption via institutional weakness, and in the process distorts economic growth dynamics in countries studied.

Keywords: Corruption, Economic Growth, Barro-Growth Model, Institutional Weakness, Dynamic Panel Regression, Point-Source and Diffused Natural Resource.