Impact of Corruption on Economic Growth : A panel data study of selected African countries

Abstract: African countries have over the last few decades, experienced a thorny path towards sustained economic growth. Quite a number of researchers have opined that a major factor responsible for their stunted growth path is the prevalence of corruption in the governments of many African countries. However, a group of scholars, called revisionists, have suggested that corruption actually acts as grease in the wheel that ensures the smooth running of an economy, by providing a mechanism to evade inefficient bureaucratic procedures and allow more equitable representation of minority members of the society. With the increasing exposure of African economies to the international community, there is a need to examine the obtainable evidence in relation to corruption and economic growth in African countries. This thesis, therefore, aims to establish the nature of the relationship between corruption and economic growth in the selected African countries. The growth rate of gross domestic product per capita is used to represent the variable, economic growth. The study employs the use of panel data fixed effects and random effect estimation techniques, across 18 countries, over the period of 1997 – 2016. The results show that corruption has a positive relationship with economic growth in the selected African countries. This is in line with the grease in the wheel argument for corruption proposed by revisionists. The results also indicate that corruption has a moderately significant impact on economic growth at 10% level of significance. The literature review suggests that corruption affects economic growth directly and indirectly through mechanisms such as investment (private and public), human capital, openness, and institutional mechanisms, among others.