Corruption In A Country Essay

1 Introduction

Corruption has a deterrent effect on economic growth of a country; as such countries normally lose their businesses credibility and investors’ confidence as well. It also leads to unequal distribution of wealth resulting in majority of the populace being poor leaving wealth in the hands of few. Funds that could have been used for developmental purposes for benefit of the entire nation are used for private gain. According to Ian McCartney “Corruption affects every country; what many people see as a way to get things done is, in fact a crime. Every year, over US$1 trillion is paid in bribes with devastating consequences. It hits the poorest people in the poorest countries hardest”. According to Vienna, (2007) World Bank

Svensson (2005) found that a percentage point increase in the bribery rate is associated with a decrease in firm growth of three percentage points, this will increase trade costs, and at the end of the day those extra costs will have to be paid by the consumer. Foreign Direct Investment (FDI) behaves similarly: in a study by Wei, (2000), showed that an increase in either trade taxes or corruption reduced FDI in the host country. Hasan and Sarkar (2011), posit that if corruption perceptions index (CPI) increases or the level of corruption decreases there is a significant (with a probability of more than 95 per cent) increase in the efficiency of

Corruption has been found to be a major obstacle to economic growth (growth of small and medium term enterprise) in developing countries. According to Murphy and Vishny, (1991), Corruption negatively affect the allocation of entrepreneurial talent, when, in highly corrupt environments, entrepreneurs may spend a lot of their time and efforts to obtaining valuable licenses and preferential market access than to improving productivity and this can hinder