Jump to ContentJump to Main Navigation
Show Summary Details
More options …

Jürges, Hendrik

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias

IMPACT FACTOR 2018: 0.520
5-year IMPACT FACTOR: 0.556

CiteScore 2018: 0.54

SCImago Journal Rank (SJR) 2018: 0.356
Source Normalized Impact per Paper (SNIP) 2018: 0.394

See all formats and pricing
More options …
Volume 16, Issue 2


Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

The Role of Income Uncertainty in the Corruption–Growth Nexus

Ratbek Dzhumashev
Published Online: 2016-02-19 | DOI: https://doi.org/10.1515/bejeap-2015-0056


This paper analyses how corruption-induced income uncertainty affects the relationship between corruption and economic growth. The analysis reveals both the growth-enhancing and deteriorating effects of corruption that transmit through the income and productivity channels, and shows how income uncertainty caused by corruption interacts with both of these effects. In particular, it is found that an increase in bribe rates and the probability of corruption that reduces the burden of regulations generate counteracting effects on income and productivity, where both effects are further aggravated by corruption-induced income uncertainty. On the other hand, a higher burden of bribes imposed by extortive bureaucrats hampers growth unambiguously. However, in a highly corrupt environment, an increase in the incidence of extortive behaviour can be growth enhancing as it reduces income uncertainty, while if corruption levels are relatively low, then a further increase in the incidence of such behaviour deteriorates growth. These findings give us a new insight into why the overall growth effect of corruption is ambiguous.

Keywords: corruption; growth; income uncertainty


  • Abed, G. T., and S. Gupta. 2002. Governance, Corruption, and Economic Performance. Washington, DC: International Monetary Fund.Google Scholar

  • Aidt, T. S. 2009. “Corruption, Institutions, and Economic Development.” Oxford Review of Economic Policy 25 (2):271–91.CrossrefGoogle Scholar

  • Aidt, T. S., J. Dutta, and V. Sena. 2008. “Governance Regimes, Corruption and Growth: Theory and Evidence.” Journal of Comparative Economics 36 (2):195–220.CrossrefGoogle Scholar

  • Andvig, J., and K. O. Moene. 1990. “How Corruption May Corrupt.” Journal of Economic Behavior and Organization 13:63–76.Google Scholar

  • Balafoutas, L. 2011. “Public Beliefs and Corruption in a Repeated Psychological Game.” Journal of Economic Behavior and Organization 78:51–9.Google Scholar

  • Barelli, P., and Sd. A. Pessoa. 2012. “A Model of Capital Accumulation and Rent Seeking.” Economic Inquiry 50 (2):399–417.CrossrefGoogle Scholar

  • Barr, A., and D. Serra. 2010. “Corruption and Culture: An Experimental Analysis.” Journal of Public Economics 94:862–9.CrossrefGoogle Scholar

  • Barreto, R. A. 2000. “Endogenous Corruption in a Neoclassical Growth Model.” European Economic Review 44 (1):35–60.CrossrefGoogle Scholar

  • Barro, R. J. 1990. “Government Spending in a Simple Model of Endogenous Growth.” The Journal of Political Economy 98 (5 Part 2):S103–25.CrossrefGoogle Scholar

  • Barro, R., and X. Sala-i Martin. 1992. “Public Finance in Models of Economic Growth.” Review of Economic Studies 59:645–61.CrossrefGoogle Scholar

  • Bates, R. H. 1981. States and Markets in Tropical Africa: The Political Bases of Agricultural Policy. Berkeley, CA: University of California Press.Google Scholar

  • Beekman, G., E. H. Bulteose, and E. E. M. Nillesen. 2013. “Corruption and Economic Activity: Micro Level Evidence from Rural Liberia.” European Journal of Political Economy 30:70–9.CrossrefGoogle Scholar

  • Blackburn, K., N. Bose, and M. E. Haque. 2006. “The Incidence and Persistence of Corruption in Economic Development.” Journal of Economic Dynamics & Control 30:2447–67.CrossrefGoogle Scholar

  • Blackburn, K., N. Bose, and M. E. Haque. 2010. “Public Expenditures, Bureaucratic Corruption and Economic Development.” Journal of Economic Studies 37:4–25.CrossrefGoogle Scholar

  • Blackburn, K., and G. F. Forgues-Puccio. 2009. “Why Is Corruption Less Harmful in Some Countries than in Others?” Journal of Economic Behavior and Organization 72 (3):797–810.Google Scholar

  • Blackburn, K., and Y. Wang. 2009. Uncertainty, Entrepreneurship and the Organisation of Corruption. Centre for Growth and Business Cycle Research Discussion Paper Series, Economics, The University of Manchester, UK. http://www.socialsciences.manchester.ac.uk/cgbcr/dpcgbcr/dpcgbcr133.pdf.

  • Broadman, H. G., and F. Recanatini. 2002. “Corruption and Policy: Back to the Roots.” Journal of Policy Reform 5:37–49.CrossrefGoogle Scholar

  • Cadot, O. 1987. “Corruption as a Gamble.” Journal of Public Economics 33:223–44.CrossrefGoogle Scholar

  • Cameron, L., A. Chaudhuri, N. Erkal, and L. Gangadharan. 2009. “Propensities to Engage in and Punish Corrupt Behavior: Experimental Evidence from Australia, India, Indonesia and Singapore.” Journal of Public Economics 93 (7–9):843–51.CrossrefGoogle Scholar

  • Campos, J. E., D. Lien, and S. Pradhan. 1999. “The Impact of Corruption on Investment: Predictability Matters.” World Development 27:1050–67.Google Scholar

  • Chang, F. -R. 2004. Stochastic Optimization in Continuous Time, Chapter 4. Cambridge; New York: Cambridge University Press.Google Scholar

  • Chen, B. L. 2003. “Tax Evasion in a Model of Endogenous Growth.” Review of Economic Dynamics 6 (2):381–403.CrossrefGoogle Scholar

  • Chen, B. L. 2006. “Economic Growth with an Optimal Public Spending Composition.” Oxford Economic Papers 58:123–36.CrossrefGoogle Scholar

  • Coppier, R., and E. Michetti. 2006. “Corruption vs Production. A Non-linear Relationship.” Economic Modelling 23:622–37.CrossrefGoogle Scholar

  • Cowell, F. A. 1990. “Tax Sheltering and the Cost of Evasion.” Oxford Economic Papers 42:231–43.CrossrefGoogle Scholar

  • Ҫulea, M., and M. Fulton. 2009. “Business Culture and Tax Evasion: Why Corruption and the Unofficial Economy Can Persist.” Journal of Economic Behavior & Organization 72:811–22.CrossrefGoogle Scholar

  • Del Monte, A., and E. Papagni. 2001. “Public Expenditure, Corruption, and Economic Growth: The Case of Italy.” European Journal of Political Economy 170:12–16.Google Scholar

  • Delavallade, C. 2006. “Corruption and Distribution of Public Spending in Developing Countries.” Journal of Economics and Finance 30 (2):222–39.CrossrefGoogle Scholar

  • Dixit, A. K., and R. S. Pindyck. 1994. Investment Under Uncertainty. Princeton: Princeton University Press.Google Scholar

  • de Vaal, A., and W. Ebben. 2011. “Institutions and the Relationship between Corruption and Economic Growth.” Review of Development Economics 15 (1):108–23.CrossrefGoogle Scholar

  • Djankov, S., R. La Porta, F. Lopez-De-Silanes, and A. Shleifer. 2002. “The Regulation of Entry.” Quarterly Journal of Economics 117:1–37.CrossrefGoogle Scholar

  • Dreher, A., and M. Gassebner. 2013. “Greasing the Wheels of Entrepreneurship? The Impact of Regulations and Corruption on Firm Entry.” Public Choice 155 (3):413–32.CrossrefGoogle Scholar

  • Dzhumashev, R. 2014a. “Corruption and Growth: The Role of Governance, Public Spending, and Economic Development.” Economic Modelling 37:202–15.CrossrefGoogle Scholar

  • Dzhumashev, R. 2014b. “The Two-Way Relationship between Government Spending and Corruption and Its Effects on Economic Growth.” Contemporary Economic Policy 32:403–19.CrossrefGoogle Scholar

  • Dzhumashev, R., and E. Gahramanov. 2010. “A Growth Model with Income Tax Evasion: Some Implications for Australia.” Economic Record 86 (275):620–36.CrossrefGoogle Scholar

  • Dzhumashev, R., and E. Gahramanov. 2011. “Comment on “a Dynamic Portfolio Choice Model of Tax Evasion: Comparative Statics of Tax Rates and Its Implication for Economic Growth.” Journal of Economic Dynamics and Control 35:253–6.Google Scholar

  • Ehrlich, I., and F. T. Lui. 1999. “Bureaucratic Corruption and Endogenous Economic Growth.” The Journal of Political Economy 107:S270–93.CrossrefGoogle Scholar

  • Evrensel, A. Y. 2010. “Corruption, Growth, and Growth Volatility.” International Review of Economics and Finance 19 (3):501–14.CrossrefGoogle Scholar

  • Fisman, R., and R. Gatti. 2006. “Bargaining for Bribes: The Role of Institutions, Ch. 4.” In International Handbook on the Economics of Corruption, edited by S. Rose-Ackerman, 127–39. Cheltenham: Edward Elgar.Google Scholar

  • Fisman, R., and J. Svensson. 2007. “Are Corruption and Taxation Really Harmful to Growth? Firm Level Evidence.” Journal of Development Economics 83 (1):63–75.CrossrefGoogle Scholar

  • Foellmi, R., and M. Oechslin. 2007. “Who Gains from Coercive Corruption?” Journal of Development Economics 82:95–119.CrossrefGoogle Scholar

  • Futagami, K., Y. Morita, and A. Shibata. 1993. “Dynamic Analysis of an Endogenous Growth Model with Public Capital.” Scandinavian Journal of Economics 95:525–607.CrossrefGoogle Scholar

  • Goel, R. K., and R. Ram. 2013. “Economic Uncertainty and Corruption: Evidence from a Large Cross-Country Data Set.” Applied Economics 454:3462–8.CrossrefGoogle Scholar

  • Haque, M. E., and R. Kneller. 2009. “Corruption Clubs: Endogenous Thresholds in Corruption and Development.” Economics of Governance 10:345–73.CrossrefGoogle Scholar

  • Hessami, Z. 2014. “Political Corruption, Public Procurement, and Budget Composition: Theory and Evidence from OECD Countries.” European Journal of Political Economy 34:372–89.CrossrefGoogle Scholar

  • Hunt, J. 2004. “Trust and Bribery: The Role of the Quid Pro Quo and the Link with Crime.” NBER Working Papers 10510.

  • Hunt, J. 2007. “Bribery in Health Care in Peru and Uganda.” NBER Working Paper 13034.

  • Huntington, S. P. 1968. Political Order in Changing Societies. New Haven, CT: Yale University Press.Google Scholar

  • Kamrad, B., and P. Ritchken. 1991. “Multinomial Approximating Models for Options With k State Variables.” Management Science 37:1640–52.Crossref

  • Kaufmann, D., and S. J. Wei. 1999. “Does’Grease Money” Speed Up the Wheels of Commerce?” NBER Working Paper No. 7093.

  • Keefer, P., and S. Knack. 2002. “Rent-Seeking and Policy Distortions when Property Rights are Insecure.” Number 2910. The World Bank.

  • Kingston, C. 2007. “Parochial Corruption.” Journal of Economic Behavior and Organization 63:73–87.Google Scholar

  • Kingston, C. 2008. “Social Structure and Cultures of Corruption.” Journal of Economic Behavior and Organization 67:90–102.Google Scholar

  • Kuncoro, A. 2006. “Corruption and Business Uncertainty in Indonesia.” ASEAN Economic Bulletin 23 (1):11–30.CrossrefGoogle Scholar

  • Leff, N. 1964. “Economic Development through Bureaucratic Corruption.” American Behavioral Scientist 8 (3):8–14.CrossrefGoogle Scholar

  • Levaggi, R., and F. Menoncin. 2012. “Tax Audits, Fines and Optimal Tax Evasion in a Dynamic Context.” Economics Letters 117 (1):318–21.CrossrefGoogle Scholar

  • Levaggi, R., and F. Menoncin. 2013. “Optimal Dynamic Tax Evasion.” Journal of Economic Dynamics and Control 37 (11):2157–67.Google Scholar

  • Li, H., L. C. Xu, and H. Zou. 2000. “Corruption, Income Distribution and Growth.” Economics and Politics 12:155–82.CrossrefGoogle Scholar

  • Lin, W.-Z., and C.-C. Yang. 2001. “A Dynamic Portfolio Choice Model of Tax Evasion: Comparative Statics of Tax Rates and Its Implication for Economic Growth.” Journal of Economic Dynamics and Control 25:1827–40.Google Scholar

  • Lui, F. T. 1985. “An Equilibrium Queuing Model of Bribery.” Journal of Political Economy 93:760–81.CrossrefGoogle Scholar

  • Lui, F. T. 1996. “Three Aspects of Corruption.” Contemporary Economic Policy 14 (3):26–9.CrossrefGoogle Scholar

  • Mauro, P. 1995. “Corruption and Growth.” Quarterly Journal of Economics 110:681–712.CrossrefGoogle Scholar

  • Mauro, P. 1998. “Corruption and Composition of Government Expenditure.” Journal of Public Economics 69:263–79.CrossrefGoogle Scholar

  • Mauro, P. 2004. “The Persistence of Corruption and Slow Economic Growth.” IMF Staff Papers 51 (1):1–18.CrossrefGoogle Scholar

  • Miller, W. L. 2006. “Corruption and Corruptibility.” World Development 34 (2):371–80.CrossrefGoogle Scholar

  • Mishra, A. 2006. “Persistence of Corruption: Some Theoretical Perspectives.” World Development 34 (2):349–58.CrossrefGoogle Scholar

  • Mo, P. H. 2001. “Corruption and Economic Growth.” Journal of Comparative Economics 29 (1):66–79.CrossrefGoogle Scholar

  • Mocan, N. 2008. “What Determines Corruption? International Evidence from Microdata.” Economic Inquiry 46 (4):493–510.CrossrefGoogle Scholar

  • Murphy, K. M., A. Shleifer, and R. W. Vishny. 1993. “Why Is Rent-Seeking so Costly to Growth?” American Economic Review Papers and Proceedings 83 (2):409–14.Google Scholar

  • Méndez, F., and F. Sepúlveda. 2006. “Corruption, Growth and Political Regimes: Cross Country Evidence.” European Journal of Political Economy 22 (1):82–98.CrossrefGoogle Scholar

  • Méon, P. -G., and K. Sekkat. 2005. “Does Corruption Grease or Sand the Wheels of Growth?” Public Choice 122:69–97.CrossrefGoogle Scholar

  • Méon, P. -G., and L. Weill. 2010. “Is Corruption an Efficient Grease?” World Development 38 (3):244–59.CrossrefGoogle Scholar

  • Pellegrini, L., and R. Gerlagh. 2004. “Corruption’s Effect on Growth and Its Transmission Channels.” KYKLOS 57 (3):429–56.CrossrefGoogle Scholar

  • Polinsky, A. M., and S. Shavell. 2001. “Corruption and Optimal Law Enforcement.” Journal of Public Economics 81:1–24.CrossrefGoogle Scholar

  • Rajkumar, A. S., and V. Swaroop. 2008. “Public Spending and Outcomes: Does Governance Matter?” Journal of Development Economics 86:96–111.CrossrefGoogle Scholar

  • Rock, M. T., and H. Bonnet. 2004. “The Comparative Politics of Corruption: Accounting for the East Asian Paradox in Empirical Studies of Corruption, Growth and Investment.” World Development 32:999–1017.CrossrefGoogle Scholar

  • Ryvkin, D., and D. Serra. 2012. “How Corruptible Are You? Bribery Under Uncertainty.” Journal of Economic Behavior and Organization 81:466–77.Google Scholar

  • Sequiera, S., and S. Djankov. 2014. “Corruption and Firm Behaviour: Evidence from African Ports.” Journal of International Economics 94 (2):277–94.CrossrefGoogle Scholar

  • Severini, T. A. 2005. Elements of Distribution Theory. New York, NY: Cambridge University Press.Google Scholar

  • Shleifer, A., and R. W. Vishny. 1993. “Corruption.” The Quarterly Journal of Economics 108 (3):599–617.CrossrefGoogle Scholar

  • Svensson, J. 2003. “Who Must Pay Bribes and How Much? Evidence from a Cross Section of Firms.” The Quarterly Journal of Economics 118 (1):207–30.CrossrefGoogle Scholar

  • Svensson, J. 2005. “Eight Questions about Corruption.” Journal of Economic Perspectives 19 (3):19–42.CrossrefGoogle Scholar

  • Swaleheen, M. 2011. “Economic Growth with Endogenous Corruption: An Empirical Study.” Public Choice 146:23–41.CrossrefGoogle Scholar

  • Tanzi, V., and H. R. Davoodi. 2000. “Corruption, Growth, and Public Finances.” IMF Working Paper, WP/00/182. Washington, DC: International Monetary Fund, Fiscal Affairs Department.

  • Tsoukis, C., and N. J. Miller. 2003. “Public Services and Endogenous Growth.” Journal of Policy Modeling 25:297–307.CrossrefGoogle Scholar

  • Turnovsky, S. J. 1996. “Fiscal Policy, Adjustment Costs and Endogenous Growth.” Oxford Economic Papers 48:361–81.CrossrefGoogle Scholar

  • Wei, S.-J. 1997. “Why Is Corruption so Much Taxing than Tax? Arbitrariness Kills.” Working Paper No. 6255. NBER, Cambridge, MA. http://www.nber.org/papers/w6255.

  • Yitzhaki, S. 1974. “A Note on Income Tax Evasion: Theoretical Analysis.” Journal of Public Economics 3 (2):201–2.CrossrefGoogle Scholar

About the article

Published Online: 2016-02-19

Published in Print: 2016-04-01

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 16, Issue 2, Pages 1169–1201, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2015-0056.

Export Citation

©2016 by De Gruyter.Get Permission

Comments (0)

Please log in or register to comment.
Log in