Title: Greasing or sanding the wheels? Effect of corruption on economic growth in sub-Saharan Africa

Authors: Muazu Ibrahim; Emmanuel Kumi; Thomas Yeboah

Addresses: Department of Economics, School of Oriental and African Studies (SOAS), University of London, UK ' Centre for Development Studies, University of Bath, UK ' Centre of Development Studies, University of Cambridge, UK

Abstract: Corruption is a pervasive challenge confronting the world economy more especially countries in sub-Saharan Africa. This paper investigates the effect of corruption on economic growth in the sub-region using data spanning 1998 to 2011. By employing the pooled estimated generalised least squares (EGLS) and two stage least squares (2SLS), we find that corruption is inimical to economic growth through its indirect effect on gross fixed capital formation and labour force. The results are not only robust to controlling for endogeneity using regional blocs of the countries as instruments in the 2SLS estimations but identifies government expenditure as additional pass-through effect of corruption on growth. Our findings suggest that for countries within the sub-region to achieve sustained economic growth, control of corruption must take precedence over the design and implementation of any macroeconomic policy. Campaign against corruption does not only improve on institutional quality but is by far growth-enhancing.

Keywords: corruption; economic growth; sub-Saharan Africa; SSA; greasing the wheels; sanding the wheels; gross fixed capital formation; labour force; government expenditure; institutional quality; growth enhancement.

DOI: 10.1504/AJESD.2015.069858

African Journal of Economic and Sustainable Development, 2015 Vol.4 No.2, pp.157 - 173

Available online: 14 Jun 2015 *

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