Corruption, economic growth, and income inequality in Africa

This paper uses panel data from African countries and a dynamic panel estimator to investigate the effects of corruption on economic growth and income distribution. I find that corruption decreases economic growth directly and indirectly through decreased investment in physical capital. A unit increase in corruption reduces the growth rates of GDP and per capita income by between 0.75 and 0.9 percentage points and between 0.39 and 0.41 percentage points per year respectively. The results also indicate that increased corruption is positively correlated with income inequality. The combined effects of decreased income growth and increased inequality suggests that corruption hurts the poor more than the rich in African countries.