NO PAY, NO GAIN? AN EMPIRICAL ANALYSIS OF CORRUPTION’S EFFECT ON BUSINESS GROWTH

Abstract

Widespread corruption around the world has raised the question about its impact on Economic and Business growth and whether corruption is a tool that helps businesses bypass inefficient regulation. This empirical study outlines the two predominant theories, “greasing the wheel” and “sanding the wheel”. Using data from the World Bank Enterprise Survey, this study utilizes regression analysis to analyze the relationship between corruption and business growth. Ultimately, the results show that amongst the full sample, corruption hinders business growth. Although the complete sample supports the “sanding the wheel” hypothesis, when performing a regional analysis, some regions support the “greasing the wheel” hypothesis.