Allocating budget in developing countries, the need to fight corruption: evidence from Sub-Saharan African countries

Abstract

This paper highlights the need to fight corruption in developing economies to ensure a better allocation of public resources in a context of institutional failure with the discretionary power of budgetary authorities. The study uses a panel of 48 Sub-Saharan African countries by combining several databases (WDI, WGI, SPEED BASE DATA and PWT), estimate by generalized moment method in system, the bias-corrected estimation linear dynamic panel data [6] and the type of error correction (Driscoll–Kraay). The results indicate that the phenomenon of corruption in the form of rent capture has two effects on public resources. One effect is linked to the level of public spending and the other to the distribution of public resources. Thus, corruption leads to an increase in the overall level of public spending. Corruption reduces spending on education, mining and communications, but increases spending on the military, health and transport. The study recommends that political leaders in developing countries strengthen and rigorously enforce anti-corruption laws, and raise public awareness of the underground economy.