Nonlinear Effects of Corruption Control on Growth: A Threshold Model

Abstract

This paper aims to analyze the nonlinear impact of control of corruption on economic growth in ASEAN countries -the emerging, frontier, and developping fastest-growing economies in Asia. The authors used a combination of threshold effects and system -GMM (Generalized Method of Moments) method for panel data in the period 2002 to 2019 to achieve reliable estimation results. The estimation results show that there is a threshold value of control of corruption of 48.08. This indicates that economic growth is impacted nonlinearly by control of corruption, and this impact is mainly positive in the regions before and after the threshold value. However, when control of corruption surpasses 48.08, the positive impact of control of corruption on economic growth decreases significantly. Accordingly, excessive control of corruption can reduce the effectiveness of economic growth in ASEAN countries. Therefore, ASEAN countries need to combine control of corruption with many other policies, especially policies on improving the effectiveness of resource allocation in the economy to boost economic growth sustainably.