Economic Development of a country is directly or indirectly related to several factors and one of the strongest constraints is corruption. Corruption has different effects on economic development. The performance of the market’s economy is based on the different types of corruption within and outside the country. Many market people consider corruption a grease on the wheels which means once the corruption is started at a point it keeps on expanding in different departments of the economy (Huang, 2016). The economic development decides whether a country is developing or developed country. Bribery is one type of corruption where individuals bribe another individual for the benefits of work being done which directly affects economic development. Bribery corruption leads to a decrease in real sales, labor wages, labor productivity in industrial firms. The performance of the company and the laborers are also affected by such kind of corruption. If the bribery dispersion rate is high, then the sales and labor productivity of the firm is most affected. The countries economy comes from industrial firms and they are the main reason for a country’s economic development. Therefore, the individuals who work in the public and private firms, they need to be ethical following all rules and regulations of the organization. The corruption also leads to an increase in the price of the products, an increase in taxes on imports and exports and results in low quality of the product. The market economy is like chain effect and has significant impact on the price and quality. Another kind of corruption is making the prices higher which are also illegal costs and leads to corrupt transactions (Song, Chang & Gong, 2020).
Huang, C. J. (2016). Is corruption bad for economic growth? Evidence from Asia-Pacific countries. The North American Journal of Economics and Finance, 35, 247-256.
Song, C. Q., Chang, C. P., & Gong, Q. (2020). Economic growth, corruption, and financial development: Global evidence. Economic Modelling.
If corruption levels are high in any economy then it is definitely highly afflicted by it. This means in such an economy often it is witnessed that power is misused in context to money or authority for achieving specific targets or goals using unfair, dishonest or illegitimate methods. These ways followed cannot help an economy prosper completely since corruption brings development down. Corrupted nations and economies can never function in an effective manner. This is because it often comes in between natural legal norms and regulations (Jimenez & Pulos, 2016). Political as well as economic activities and operations are obstructed and are corrupted which ultimately makes the society suffer.
Correlation between the amount of corruption in a country and economic development
It is difficult for any nation to erase corruption completely. It is observed that countries that have emerging economies in the market have high corruption levels than what is found in developed nations. Here is the co-relation between them listed below:
a) A high level of the price asked for low-quality goods and services: Corruption in some nations can be witnessed in the way deals are being made in such places. The varied economic operations and activities, development of structures such as oligopolies or monopolies are common in a corrupted nation. Connections are used by business enterprises for using capital to bribe government officials and authorities (Ondo, 2017). Market mechanisms and policies are modified and tweaked through bribing.
b) Resource allocation is inefficient: In general, business organizations select distributors and suppliers using tendering processes. Tender is a request or a proposal made by companies. These usually serve as market mechanisms for enabling a process in which suppliers are chosen and they offer the best price and quality of goods and services. Corrupted economies or companies are such that tenders or request proposals are only awarded illegitimately ad on the basis of bribing.
c) Wealth is distributed in an uneven manner: A corrupted economy is featured by small or a middle class in a misappropriate manner. The living standard which exists between the lower and the upper class is varied significantly in such an economy which is corrupted. Most capital or funding of such countries are usually collected in corrupted people or oligarchs. The wealth is flowing only to such individuals. Small businesses do not get encouraged to be developed as there are illegal pressures as well as unfair completion (Mauro, 2017).
d) Innovation Stimulation is much less: Corrupted economies are characterized by low morale and confidence. Hence people lose their confidence often over the legal systems and judgments. Innovation related eagerness and initiatives are hence quite low. Often it is found that judgments are rugged and there is a huge amount of favoritism going on and this looses the morale of potential innovators. Bribing the authorities is a common way people use to approve their works in a corrupted nation. Hence the overall incentive to do something new is low.
So, in a nutshell, it can be said that if countries engaged in corruption then they cannot see economic development fast.
Jimenez, G., & Pulos, E. (2016). Good Corporation, Bad Corporation (2nd ed., p. 235). USA: Open Suny Textbooks.
Ondo, A. (2017). Corruption and Economic Growth: The Case of EMCCA. Theoretical Economics Letters, 07(05), 1292-1305. doi: 10.4236/tel.2017.75088
Mauro, P. (2017). Corruption and Growth. The Quarterly Journal Of Economics, 110(3), 681-712. doi: 10.2307/2946696