GREASING OR SANDING? GMM ESTIMATION OF THE CORRUPTION-INVESTMENT RELATIONSHIP

This paper employs the generalized method of moments (GMM) technique to a large sample of 74 developing countries over the period 2000 to 2008 to investigate the effect of corruption on the rate of investment. Overall results (all countries together) indicate that the control of corruption has a positive impact on the investment rate. Regional detailed investigations suggest that the effect of corruption control on the investment rate is positive in Sub-Saharan Africa, and Latin America and the Caribbean. No significant effect is found in Asia. In general, the sanding hypothesis is found to be dominant in our investigation