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Impacts of Corruption on Sustainable Development: A Simultaneous Equations Model Estimation Approach

Author

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  • Murshed, Muntasir
  • Mredula, Farzana Awlad
Abstract
The concept of sustainable development epitomizes theoretical frameworks advocating in favor of at least maintaining the rate of development attained in the previous period. Traditionally, development was viewed from a narrow dimension that focused primarily on the development of the economy. However, with time, development has gathered emphasis from a broader perspective incorporating economic, social and environmental welfares into consideration. However, corruption is perceived to be a major factor inhibiting sustainable development all around the globe. The aim of this paper is to shed light on the corruption-sustainable development nexus from the perspective of select 47 countries across Asia, Africa and Latin America and the Caribbean (LAC). The paper attempts to estimate the elasticities of socioeconomic and environmental development indicators with regard to corruption and other macroeconomic fundamentals using annual data from 2000 to 2015. In addition, the paper also tests the Environmental Kuznets’s Curve hypothesis in a panel framework and estimates the threshold levels of income at which the environmental degradation takes place with economic growth. Panel unit root and cointegration tests are used while the Three-Stage Least Squares (3SLS) estimation technique is employed to calculate the associated elasticities. Moreover, in order to check the robustness of the relationships, Panel Vector-Error Correction Model (VECM) and Granger causality test are also considered to understand the short run and long-run causal associations between the variables. In light of the estimated results, corruption is found to have a negative relationship with socioeconomic development across the Asian, African and LAC subpanels. In addition, corruption negatively affects environmental development in the context of the Asian and African subpanels while positively affecting in context of the LAC subpanel. Moreover, the findings also suggest that the EKC hypothesis holds true only in the cases of the full panel and the LAC subpanel, with the threshold per capita GDP being around 12,000 US$ and 12,780 US$, respectively. Our paper also finds short run bidirectional causality between corruption and socioeconomic development in the context of all the countries cumulatively which did not hold to be true in the long run. Furthermore, corruption and CO2 emissions portray short bi-directional causality in context of the selected Asian economies and a unidirectional causality running from corruption to CO2 emission for all the economies as a whole.

Suggested Citation

  • Murshed, Muntasir & Mredula, Farzana Awlad, 2018. "Impacts of Corruption on Sustainable Development: A Simultaneous Equations Model Estimation Approach," MPRA Paper 97419, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:97419
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    References listed on IDEAS

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    1. Liao, Xianchun & Dogan, Eyup & Baek, Jungho, 2017. "Does corruption matter for the environment? Panel evidence from China," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 11, pages 1-12.
    2. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    3. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    4. Muntasir Murshed, 2018. "Does Improvement in Trade Openness Facilitate Renewable Energy Transition? Evidence from Selected South Asian Economies," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 19(2), pages 151-170, September.
    5. World Commission on Environment and Development,, 1987. "Our Common Future," OUP Catalogue, Oxford University Press, number 9780192820808.
    6. Dinda, Soumyananda, 2004. "Environmental Kuznets Curve Hypothesis: A Survey," Ecological Economics, Elsevier, vol. 49(4), pages 431-455, August.
    7. Mohamed Dridi, 2014. "Corruption and Education: Empirical Evidence," International Journal of Economics and Financial Issues, Econjournals, vol. 4(3), pages 476-493.
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    Cited by:

    1. Amira Mohamed Emara, 2020. "The Impact of Corruption on Human Development in Egypt," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(5), pages 574-589, May.
    2. Abdelhak Senadjki & Samuel Ogbeibu & Chee Yin Yip & Hui Nee Au Yong & Mourad Senadjki, 2021. "The impact of corruption and university education on African innovation: evidence from emerging African economies," SN Business & Economics, Springer, vol. 1(5), pages 1-26, May.
    3. Monica Violeta Achim & Viorela Ligia Văidean & Sorin Nicolae Borlea & Decebal Remus Florescu, 2021. "The Impact of the Development of Society on Economic and Financial Crime. Case Study for European Union Member States," Risks, MDPI, vol. 9(5), pages 1-20, May.
    4. Fhima, Fredj & Nouira, Ridha & Sekkat, Khalid, 2023. "How does corruption affect sustainable development? A threshold non-linear analysis," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 505-523.

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    More about this item

    Keywords

    Sustainable Development Goals; Corruption;

    JEL classification:

    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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