Corruption, public investment, and growth

Corruption, particularly political or "grand corruption", distorts the entire decision-making process connected with public investment projects. The degree of distorsions is higher with weaker auditing institutions. The evidence presented shows that corruption is associated with higher public investment; lower government revenues; lower expenditures on operations and maintenance; and lower quality of public infrastructure. The evidence also shows that corruption increases public investment while reducing its productivity. These are five channels through which corruption lowers growth. An implication is that economists should be more restrained in their praise of high public sector investment, especially in countries with high corruption.