The relationship of corruption to economic activity in the OECD

Abstract

This study extends earlier research regarding the relationship of corruption to economic activity. Corruption negatively affects all members of society but research indicates a gender bias, specifically, that women are more vulnerable and suffer to a greater extent than men. In the current study, three measures of economic activity are examined: gross domestic product (GDP), foreign direct investment (FDI), and unemployment rate. A fourth factor, Economic Freedom, is also analysed to assess the relationship between corruption and level of government involvement in a country's economy. Findings indicate that increases in gross domestic product per capita are significantly higher in low-corruption countries. Further, nations with lower levels of corruption experience noticeably lower unemployment rates compared to nations with higher levels of corruption. Additionally, findings show that low-corruption countries tend to have more economically open and free societies. Economic data for the study was collected from the organisation of economic cooperation and development (OECD), from the World Bank, and from the Heritage Foundation's index of economic freedom database. Corruption level data was obtained from Transparency International, which annually publishes a ranking of countries based on perceived corruption. Corruption activities include but are not limited to: corporate fraud, bribery, and cartels.