Centre for Growth and Business Cycle Research Discussion Paper Series

'Corruption Clubs: Endogenous Thresholds in Corruption and Development'

M. Emranul Haque and Richard Kneller

November 2005, Centre for Growth and Business Cycle Research Discussion Paper Series, University of Manchester, No. 67. Download PDF file (641KB).

The relationship between corruption and economic development is characterised by three stylised facts: (i) a strong negative correlation between corruption and development (ii) countries can remain trapped in high corruption-low development or low corruption-high development equilibria (iii) amongst intermediate levels of development corruption levels are more variable, some countries have high corruption and others low corruption. This paper argues that existing models are consistent with the first two only and demonstrates how these models might be extended to capture all three. The paper searches for the location of corruption clubs within the data and provides some explanation of their cause.