GDP and Corruption Essay Example | Topics and Well Written Essays - 3000 words

gross domestic product and Corruption - Essay ExampleThe main objective of this paper is to use econometrics methods to exhibition the blood surrounded by GDP and depravation, results show that the higher the take aim of depravation in a country the lower the level of GDP, correlation coefficients show that as the level of corruption in a country increases GDP declines, results show that African countries have higher specify corruption levels than the other non African countries.A study by Mauro (1995) showed that corruption had an tack on the level of investment in a country, in his study he found out that corruption discouraged foreign direct investment. Ackerman (1998) states that if India was to reduce its corruption levels then it would pluck foreign direct investment at the same level as the attraction attained through tax incentives, Another study by Tanzi and Davoodi (1997) showed that corruption tends to increase the level of government spending, these funds atomic number 18 not used for their intended purpose and therefore spending on education and health is trim down resulting to poor economic growth and human capital development.Bardhan (1997) study shows that corruption also affects income distribution and this increases pauperization levels in a country, Krueger (1994) states that corruption affects the election of leaders and the decisions made by these leaders may adversely affect the economy.The level of GDP is a key indicator of the welfare and economic development in an economy, the level of GDP in a country is determined by a number of factors which involve the interest rates, inflation, investment, infrastructure, human capital, capital stock, production, exports and consumption, however less emphasis has been put on the importance of eliminating corruption practices as a way to influence economic growth.In this paper we focus on the effect of corruption on the GDP level of a country, we use data on corruption magnate from tran sparency international and GDP level from the world bank, we use linear retroflexion models to estimate the relationship between these variables and show that corruption affects the level of GDP, limitations include unavailability of data for countries and the violation of linear regression assumptions on auto regression given that we will be considering cross sectional data. The following is a description of the data and econometric modelling. DataData used was retrieved from transparency international website that indicate corruption index for the stratum 2007 for countries all over the world, data on GDP in US dollars for the year 2007 was retrieved from the world bank website. A sample of 152 countries was considered in the study and this was due to the availability of data. The following graph represents the countries considered in this study where countries are categorized into African and non African countriesOnly 3 % of the countries are African while approximately 97% wer e non African countries, analysis on the GDP levels showed that the mean GDP levels for non African countries was relatively higher compared to the mean GDP for African countries, the following chart summarizes the resultsResults also show that the mean corruption index value for African countries was relatively lower than the mean corrupti