Corruption, growth, and growth volatility

While the existing studies focus on the corruption-growth relationship, this paper introduces a new focus involving corruption and growth volatility. The Ehrlich-Lui (1999) framework provides the theoretical background of the paper, which produces testable hypotheses regarding the corruption-growth and the corruption-growth volatility relationship. The cross-section dataset that is used in the empirical analysis contains 121 developed and developing countries. In terms of the relationship between the governance-related variables and growth rates, only corruption control and government effectiveness significantly and adversely affect the average growth rate. Regarding the relationship between growth volatility and governance-related variables, the results suggest that higher corruption control, expropriation risk control, government effectiveness, and government consumption decrease growth volatility. (C) 2009 Elsevier Inc. All rights reserved.