Geographic Endowment, Corruption, and Economic Development

Abstract

Corruption plays an important role in determining the effectiveness and quality of the institution, and growth. This paper investigates the linkage between corruption, various measures of geographical endowments and economic growth. I use corruption as a proxy for institutional quality and try to solve the endogeneity problem by Instrumental Variable approach as 2SLS for panel data for a sample of 192 countries and showed that corruption matters for economic growth. The results indicate that graphical endowments explain cross-country variation in economic development through their effect on corruption even when I control for other historical and cultural factors. Thus, when considering making policy for developing or developed countries much attention should be paid to this fact.