Corruption and Economic Growth Nexus: What has the Arab Spring Changed?

Abstract

Corruption is an everlasting phenomenon in the Middle East and North Africa (MENA). It is considered one of the fundamental reasons for the Arab incidents that started in Tunisia in 2011. Considering its devastating effects, this paper concentrates on the impacts of corruption at the macro level following the Arab uprisings. Notably, it investigates the impact of corruption on economic growth between 1996-2020. The paper utilizes panel estimators with country-fixed effect regressions given the results of the Hausman test. Panel estimators help control time-variant unobserved heterogeneity and capture both time and country-specific differences. The results indicate that after the Arab Spring, corruption lowers economic growth in the MENA region. One unit increase in control of corruption score of World Governance Indicators (WGI) decreases economic growth between 1.64-2.98 percentage points depending on the model. The results are robust with alternative corruption indexes such as the International Country Risk Guide (ICRG), Varieties of Democracy (V-Dem), and lastly, the Corruption Perception Index (CPI). Furthermore, the Chow test also confirms that 2011 constitutes a structural break in the history of the MENA region. The outcomes indicate that specific policies need to be implemented to alleviate the adverse impacts of corruption in MENA countries.

MENA region remains at crossroads: a panel analysis modelling political stability and economic freedom to determine economic growth

“…The mainstream literature focused on the relationship between political instability indicators and economic growth and, they came to the common consensus that the region's political instability hampered its economic growth. As well, policymakers' inability to plan ahead exacerbated the region's subpar performance in the short run and long run (Campos & Nugent,2002;KIRŞANLI, 2023;Tang & Abosedra, 2014) There is no doubt that the region's trajectory towards recovery requires more than 30 years in transition as per the analysis of regional experts (Carothers, 2002). More importantly, the region's complexity was aggravated through the presence of oil's vested interests and the rentier nature of some of its economy, which certainly took a toll on its governance indicators and border conflicts.…”

Arab Spring, democratization of corruption, and income inequality

“…The findings of our paper have important implications for various United Nations' Sustainable Development Goals (SDG) due to the interrelationships between corruption, income inequality, and economic growth. This is due to the fact not only corruption has been shown to affect economic growth negatively (d'Agostino et al, 2016; Kırşanlı, 2023; Mauro, 1995), but income inequality has also been shown to be significantly associated with economic growth (Banerjee & Duflo, 2003). Therefore, corruption cannot only impact growth directly but will also have indirect effects through a change in income inequality.…”