Corruption, institutions and economic growth in South America: evidence from multi-dimensional governance indicators
Dimitrios Asteriou, Pablo Andrés Rocha Vélez, Konstantinos SpanosPurpose
This study examines how corruption and institutional quality interact to influence long-run economic growth in nine South American economies over the period 1980–2019. It explores whether the economic effects of corruption are uniform or conditional on institutional strength, with particular emphasis on judicial and legislative integrity as moderating factors.
Design/methodology/approach
The study develops an extended Solow-type framework where corruption affects total factor productivity and institutions moderate this effect. Using V-Dem corruption indicators, the analysis applies Common Correlated Effects Mean Group (CCE-MG), Dynamic CCE, Dynamic Ordinary Least Squares and panel threshold estimators to account for heterogeneity and cross-sectional dependence.
Findings
Corruption has a persistent negative effect on economic growth, while stronger judicial and legislative integrity improves productivity. Threshold results show that corruption is more damaging under weak institutional conditions and less harmful once institutional quality passes a critical level.
Research limitations/implications
The study focuses on South America and uses governance indicators that may not fully capture informal corruption. Future research could extend the framework to other regions and include additional institutional or financial channels.
Practical implications
The findings suggest that anti-corruption policies are more effective when combined with stronger judicial independence and legislative accountability. Institutional reforms are crucial for reducing the economic costs of corruption.
Social implications
Improved institutional quality can enhance public trust, strengthen accountability and improve the efficiency of public resource allocation, contributing to more inclusive and sustainable development.
Originality/value
The article contributes by combining disaggregated corruption measures with a panel threshold framework, showing that corruption's growth effects are non-linear and conditional on institutional quality. It provides new evidence for South America and extends recent debates on governance and development.