CORRUPTION, POVERTY AND ECONOMIC PERFORMANCE:EASTERN EUROPEAND CENTRAL ASIA CASE

• Main Authors: Mustafa Ildırar, Erhan Iscan
• Format: Article
• Language: English
• Published: Social Sciences Research Society 2015-07-01
• Series: International Journal of Economics and Finance Studies
• Online Access: http://www.sobiad.org/eJOURNALS/journal_IJEF/archieves/ijef_2015/mustafa-ildirar.pdf

Corruption, defined as “the misuse of public power for private benefit.” TheWorld Bank describes corruption as one of the greatest obstacles to economic andsocial development. It undermines development by distortingthe rule of law andweakening the institutional foundation on which economic performance depends.In pastdecades, many theoretical and empirical studies have presented corruptionhinders investment, reduces economicgrowth, restricts trade, distorts governmentexpenditures and strengthens the underground economy. In addition,they haveshown a strong connection between corruption and poverty and incomeinequality. On the other hand,theliterature on corruption points to the conclusionthat corruption by itself does not lead to poverty. Rather,corruption has directconsequences on economic and governance factors, intermediaries that in turn producepoverty. Although corruption is seen inmany countries in the world, it ishigher and widespread in developingcountries. This study investigates relationbetween corruption, poverty, and economic performance by using apanelconsisting of countries in the Eastern Europe and Central Asia countries. It wasshown that corruptionaffected directly economic performance and low economicperformance leads to poverty. Additionally, resultsimply that rules againstcorruption could affect economic growth indirectly through their impact on thelevel ofc orruption.