Corruption Accounting and Economic Growth: Towards a New Methodology

MARTIN GRANDES; ARIEL COREMBERG

Journal of Financial Crime

Emerald Publishing

Año: 2020

1359-0790

In this paper, we demonstrate empirically that corruption causes signi-cant and sizeable macroeconomic costs in terms of economic activity andeconomic growth and lay the foundations of a new methodology to accountcorruption losses using data from the National Accounts and judiciary investigationswithin the framework of the OECD Non-Observed Economy insteadof subjetive indicators as in the earlier literature. These costs imply that thestandard microeconomic and political economy theories on the causes andconsequences of corruption, especially in less developed economies with weakinstitutions, low total factor productivity and unstable macroeconomic fundamentals,are not able to explain the full magnitude and outreach of thecorruption phenomenon. After modelling corruption as a tax in an endogenousgrowth model, we estimate the baseline (bribes paid to public ocials)macroeconomic cost of corruption using Argentina 2004-2015 as a case study.We nd it stands at a minimum accumulated rate of 8 percent of GDP or 0,8percent yearly. These ndings provide a corruption cost oor and are consistentwith earlier research on world corruption losses estimated at 5 percentby the World Economic Forum and with Brazil and Peru´s corruption losseswhich have been estimated at between a yearly rate of 1.3 and 4 percent ofGDP, and 2 percent respectively.