A DYNAMIC ANALYSIS OF THE CAUSES AND CONSEQUENCES OF CORRUPTION

Abstract

Corruption erodes trust, weakens democracy, hampers economic development and further exacerbates inequality, poverty, social division and the environmental crisis. This article focuses on the spread and growth of corruption in organizations. This article takes up the challenge of creating a greater understanding of how corruption grows and develops over time. The data suggests that there is a negative effect of corruption on investment, and that this effect is less severe in countries with particularly obtrusive bureaucracies, though this difference with low red-tape countries is only mildly significant. The evidence also suggests that corruption is associated with the lack of competition in the product market and with weaker/less independent judicial systems. The evidence suggests that both tighter enforcement of laws and increases in product market competition have negative and significant effects on a country's level of corruption.