Causes and consequences of corruption: the context of Asia

Corruption is receiving a lot of attention globally and researchers have been discussing issues related to the causes and consequences. This paper investigates the effect of government size on corruption, and further confirm the consistency of the initial model by investigating whether additional independent variables such as democracy, economic freedom and economic growth would produce a better model. Using annual data from 27 countries between 2007 to 2016, empirical results indicate that a larger government size will lead to lower level of corruption. The result is consistent in the enhanced model and surprisingly we have discovered that democracy, one of the widely discussed factor, is not significant to corruption. We conduct another investigation on whether corruption negatively affects economic growth based on same period and data set. Empirical result shows that corruption perception index (higher index indicates lower corruption) is positively significant to economic growth at five percent confidence level for twenty seven countries in Asia, acting as a “sand the wheel” effect on the economy. This study suggests policy maker in Asia region that they may need to review existing policy in order to effectively curb corruption and improve the economy