A Cross-Country Comparison of Corruption and Public Expenditures: A Panel Data Approach

Abstract

Corruption is an especially serious problem for all countries, and has damaging effects on sustainable economic growth. Although there is a significant relationship between corruption and public expenditures, the degree and way of this relationship is changed according to countries. The main objective of this article is to analyze the relationship between corruption and the level and composition of public expenditures, using data from 21 countries which are classified as countries in above and below average corruption perception indices. In empirical analysis, panel data were used in modeling of the effects of corruption on public expenditures. The empirical results show the findings support the hypothesis that the composition of public expenditures has an important element on corruption for countries.

Keywords:

• corruption
• public expenditures
• panel data

Notes

¹Indirect factor can include red-tape, wage level, punishment system, audit, lack of transparency and cultural factors and so on.