Does Corruption Hinder Economic Growth? A Simultaneous Analysis

Abstract

Corruption has a causal relationship with economic growth that has long been studied by economists. This study aims to determine the causal relationship between corruption and economic growth, the human development and good governance effects on corruption, and the effect of investment, labor force, and the use of technology on economic growth. The data used is panel data consisting of 43 Asian countries in 2012-2022 which were analyzed using Two-Stage Least Squares (2SLS). This study found that corruption and economic growth have a positive causal relationship, thus supporting the theory of Sand the Wheel that corruption hinders economic growth in Asian countries except Central Asia, and the determinants of corruption and economic growth have varying effects in the Asian region. This study provides information for stakeholders to develop policies that encourage economic growth through a strategy of prioritizing human development, creating good governance, and increasing physical capital, human capital, and technology adoption.