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impact on economic growth at regional levels. Gymiah-Brempong (2002) finds that
corruption hinders growth in Africa. Abed and Davoodi (2002) obtain insignificant results for
a cross-section of 25 transition countries once an index of structural reforms is included.
Guetat (2006) attempts to separate the impact of corruption in MENA countries on growth
from other countries including Latin American, Asian, and Sub-Saharan Africa by estimating
an economic growth model for a sample of 90 countries during the period 1960-2000. The
authors claim that corruption deters growth more significantly in MENA countries than in
Latin American and other countries. Kutan and Douglas (2006) propose a similar comparison
between these two regions, although their focus is on a different period and they concentrate
on comparison of levels instead of growth of GDP. They find that while less corruption was
associated with improved economic development in MENA countries, it had no significant
relationship with economic growth in Latin American countries during the decade of 1993-
2003.
The first investigation on the impact of corruption on investment in a cross-section of
countries was undertaken in the already mentioned work of Mauro (1995). He finds that
corruption significantly lowers the ratio of investment to GDP. He claims that if Bangladesh
were to improve its level of integrity to that of Uruguay, its investment rate would increase by
almost five per cent of GDP. Mauro’s finding has been backed by empirical investigations
that use other indices of corruption and differing samples of countries: Knack and Keefer
(1995), Mauro, (1997), Brunetti, Kisunko and Weder (1998), Brunetti and Weder (1998),
Campos, Lien, and Pradhan, (1999), Mo, (2001), Lambsdorff, (2003); Pellegrini and Gerlagh,
(2004).
There is also growing evidence that corruption slows down foreign direct investment. Wei
(1997) showed that investment in a relatively corrupt country (Mexico), as compared to an
incorrupt one (Singapore), is an equivalent of an additional 20 per cent tax on investment.
Moreover, the statistical relationship between corruption and lower foreign investment holds
across all regions of the world (Ades & Di Tella 1997). The view that corruption acts like a
tax deterring FDI is supported by further studies of Wei (1999, 2000a, 2000b), Smarzynska
and Wei (2000), Doh and Teegen (2003), Habib and Zurawicki (2001, 2002). This assertion is
also true particularly in postcommunist and MENA countries. Abed and Davoodi (2002)
obtain a negative impact of corruption on the value of FDI per capita for a cross-section of 24
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