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EFFECT OF CORRUPTION ON ECONOMIC GROWTH IN EASTERN AFRICA: DISAGGREGATED APPROACH
Abstract: High corruption phenomenon is a common problem faced by several developing countries. Weak bureaucracy, weak law and justice enforcement are assumed to be the causes of the corruption. However, the available studies majority are of single countries that has focused mainly on the relationship between overall corruption and economic growth and failing to provide the specific relationship between corruption and economic growth in Eastern African countries. The main objective of this study was to investigate the effect of corruption on economic growth in Eastern Africa. This study was modeled using Public choice theory and corruption. Hausman Specification tests was conducted to assess whether to use the fixed effects or random effect panel estimation. The Random effect model results showed that corruption had a negative and statistically significant relationship with economic growth, fixed effect model results on public resource equity had a negative and a statistically insignificant relationship with economic growth whereas the random effect model results on public sector management had a negative and statistically significant relationship with economic growth. The study concluded that Corruption decreases the growth rate of per capita income directly by decreasing the productivity of existing resources and indirectly through reduced investments and also discourages investment savings and culture of hard work among the Eastern African countries. The study recommended that there should be formulation of policies in Eastern Africa that aims to help and improve the quality of the public sector management and minimize corruption activities in the public sectors.
Key Words: Corruption, public sector resource equity, public sector management, Economic growth, Nigeria