Why some countries thrive despite corruption : the role of trust on the corruption-efficiency relationship

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Southern New Hampshire University
While it is widely accepted that corruption negatively affects economic growth, why some countries achieve rapid growth under rampant corruption remains a puzzle. We shed light on this issue by examining the role of trust in the corruption-efficiency relationship. We argue that in countries with a relatively high level of trust, corruption tends to be more "efficiency enhancing" than corruption in countries with a relatively low level of trust, which tends to be more "predatory" and thus, inefficient. To illustrate our arguments, we first conduct a qualitative comparative case study of China and the Philippines. We then further subject our ideas to a quantitative test using a pooled data set of 65 countries in two time periods. Both our case study and statistical test support our general hypothesis that trust mitigates the negative effect of corruption on economic growth.
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