The relationship between corruption and GDP in low- vs high-income countries

Abstract

This study examines the relationship between corruption and GDP per capita growth, focusing on differences between high- and low-income countries. Corruption is widely regarded as a key factor influencing economic outcomes, yet its impact may vary depending on institutional and economic conditions. Using panel data from over 200 countries during the period 2012-2024, this study analyses the relationship between corruption and GDP per capita growth. Corruption is measured using the Corruption Perceptions Index (CPI), while economic growth is captured through GDP per capita growth and selected control variables. The theoretical framework suggests that corruption can negatively affect economic growth through reduced investment, inefficient resource allocation, and weakened institutional quality. Moreover, these effects are expected to be more distinct in low-income countries due to weaker institutions. In contrast to the theoretical expectations, the findings of this study indicate that the relationship between corruption and GDP per capita growth is more complex than implied by a simple direct association and may depend on broader economic and institutional conditions.