III. The Growth Process - 2

Some of these growth effects have
been statistically corroborated from
cross-country data. On the basis of corruption
rankings data assembled from
the Business International correspondents7
in 70 countries in the early
1980s, as reported in Table 1 in the Appendix,
Paolo Mauro (1995) finds a significant
negative association between
the corruption index and the investment
rate or the rate of growth (even after
controlling for some other determinants
of the latter, and correcting for a possible
endogeneity bias in the data). A
one-standard-deviation improvement in
the corruption index is estimated to be
associated with an increase in the investment
rate by about 3 percent of
GDP.8 The negative relation seems to
hold even in subsamples of countries
where bureaucratic regulations are reported
to be cumbersome, indicating
that corruption as a way of by-passing
these regulations may not have been
very beneficial.
Historians, of course, point to many
cases when a great deal of corruption in
dispensing licenses, or loans, or mining
and land concessions has been associated
with (and may have even helped
in) the emergence of an entrepreneurial
class. In European history the latter
class grew out of the sales of monopoly
rights, tax farms, and other forms of
privileged access to public resources. In
the U.S. “gilded age” of 1860s and
1870s widespread corruption of state
legislatures and city governments by
business interests and those seeking
franchises for public utilities is reported
to have helped rather than hindered