ABSTRACT
The debate on the effects of corruption on economic activity is unsettled. Some have argued that corruption hurts economic development because it redirects resources in an unproductive direction and instills distortions in the economy (Shleifer and Vishny, 1993). For example, Tanzi and Davoodi (1997) identify four channels through which corruption may have an adverse effect on economic growth: higher public investment, lower government revenues, lower expenditures on business operations and maintenance, and lower quality of public infrastructure.
