Rule Of Law: Interrelationship Between Economic Growth And Corruption

Rule of Law

The rule of law implies protection and respect of human rights, effective compliance and enforcement of law and order by police and an independent judiciary. Under a strong rule of law, the citizen's property is defended from unlawful seizures and appropriation. The rule of law stimulates economic growth because it gives people the confidence to save and invest (Nwabuzor, 2005). Thereby, the rule of law may be an efficient tool against corruption, because, in countries or societies where the law enforcement agencies adhere to the rules, corruption will not be allowed to flourish.

Numerous researches have been spent to examine the hypothesis about the negative influence of the rule of law on corruption. The results clearly show

Using Italy as a case study, they assembled data about 20 Italian provinces’ number of committed crimes against the public administration and GDP per capita. The number of committed crimes against the public administration was used to measure the corruption level and GDP per capita to evaluate economic growth. The authors found that in provinces where the effectiveness of public expenditure is low, corruption is high; the economic development of Italian provinces was negatively correlated withcorruption. They argue that corruption delays economic growth by lowering the quality and amount of social infrastructure and services provided to the private sector. Corruption emerges when bureaucrats control state assets to produce public services and goods. The illicit behaviour of bureaucrats arises either from supplying the government with a lower quality commodities at the same cost as those available in private markets, obtaining similar goods at a higher cost, or both. Officials and private actors consent to benefit by hiding information from the citizens, even if the officials” behaviour is deleterious to the prosperity of the society. Similarly, Mo (2001) estimated the relationship between economic growth and corruption by using the corruption perception index of Transparency International and the GDP growth rate of nations from the panel data set developed by Robert Barro and Jong-Wha Lee. Mo (2002) found that if the economic growth level decreases by 0.72%, the degree of corruption grows by 1%. In other words, a 0.545 points decline in economic growth leads to one-unit growth in the corruption index. Mauro (1995) evaluated the interrelation of economic growth with corruption by using data from Business International (BI) on corruption between 1980 and 1983. The index of BI