Roads to nowhere: How corruption in public investment hurts growth

Ribbon-cutting ceremonies marking the opening of investment projects, such as roads, dams, irrigation canals, power plants, ports, airports, schools, and hospital, are every politician's dream. The very act of cutting the ribbon seems to identify the shear-wielding politician as a contributor to the future growth of the economy. In some countries, however, corrupt politicians appear to choose investment projects not on the basis of their intrinsic economic worth, but on the opportunity for bribes and kickbacks these projects present. This paper argues that such corruption increases the number of capital projects undertaken and tends to enlarge their size and complexity. The result is that, paradoxically, some public investment can end up reducing a country's growth because, even though the share of public investment in gross domestic product may have risen, the average productivity of that investment has dropped.