Bohan_to_Ana

It’s a good point to test the relationship between corruption and economic development. Indeed in many developing countries corruption can be regarded as paying extra fees in exchange of “private” provision of public goods for enterproneurs. I have two questions regarding your proposal:

• First, when you test the relationship between corruption and public investment, would you divide it based on different periods? For example, many emerging economies have experienced a fast growth period and then fall into slower growth rate. In the early periods, corruption may indeed facilitate investment. When the economy has developed into a certain stage in which law enforcement is stricter, corruption may have a decreasing effect on economic behavior.
• Second, you mentioned that “whether it promotes economic growth or not depends on where the capital goes”. Are you sure this is the only major criterion for measuring how corruption affects economic growth? In addition, for countries that impose strict regulation on capital flow, how would you test it since the capital flow is to a large degree affected by such policy.