Corruption as an obstacle to economic growth of national economies

Abstract

There is no unified definition of the concept of corruption existing today at the level of theoretical or practical application. However, all current approaches agree that corruption represents any unfair behaviour with the goal of gaining a certain unqualified advantage at the expense of others. Professional literature presents mixed evidence about its impact on economic growth. Some authors consider corruption as a "driving force" of the economy, but others argue that it is "sand in the wheels". Most authors are of the opinion that corruption complicates economic transactions because it reduces the security of property rights and contributes to inefficient allocation of resources. Corruption often threatens the role of the government and makes it difficult for government intervention. It also leads to poor resource allocation, since the structure of public expenditure often changes in favour of certain sectors, especially those which have more obvious corruption opportunities. This paper, based on findings in theoretical literature and empirical studies, validates the hypothesis on the negative impact of corruption on economic growth in the European Union in the period 1999 - 2014. Using information from the literature, an econometric model has been derived for this purpose, which provides an overview of what effect corruption in the selected sample of countries has on economic growth. This econometric model has shown that corruption negatively affects economic growth in the selected set of countries, not only directly but also indirectly through distribution channels. The distribution channels through which corruption affects economic growth within the selected group of countries have been defined as household expenditures, government expenditures and investments.