Jejak Vol 13 (2) (2020): 265-279 DOI: https://doi.org/10.15294/jejak.v13i2.24228

JEJAK Journal of Economics and Policy http://journal.unnes.ac.id/nju/index.php/jejak Corruption and Economic Growth in West Africa

Clement Atewe Ighodaro1, 2Sunday Osahon Igbinedion

1,2Departement of Economics, Faculty of Social Sciences, University of Benin, Benin City, Nigeria

Permalink/DOI: https://doi.org/10.15294/jejak.v13i2.24228

Received: May 2020; Accepted: July 2020; Published: September 2020

Abstract The level of corruption in West Africa has become very worrisome based on the data from the corruption perception index of transparency international. Corruption may subvert due process; reduce accountability; lead to unequal distribution of goods and services and limit the reliance of the masses on government. The objective of the paper was to examine the link between corruption and economic growth in West Africa. Data used span from 2000 to 2018 with a cross section of fifteen West Africa countries and the use of panel fully modified ordinary least squares. With the use of the Im, Pesaran, and Shin stationarity which allows for heterogeneous version of the Dickey Fuller test, it was found that the variables used were integrated of order one and long run equilibrium relationship existed based on the Pedroni cointegration method. Only foreign direct investment did not meet the a priori expectation. The result supports the ‘grease on the wheel hypothesis’. This implies that corruption and economic growth have direct relationship in West Africa. Corruption and economic growth were found to also support the U-shaped hypothesis which means that different corruption level affect economic growth in different ways. However, corruption does not lead to efficient and effective outcomes hence should not be allowed at any level of governance.

Key words : Corruption, Economic Growth, Panel FMOL, U-Shaped Hypothesis, West Africa

How to Cite: Ighodaro, C., & Igbinedion, S. (2020). Corruption and Economic Growth in West Africa. JEJAK: Jurnal Ekonomi dan Kebijakan, 13(2), 265-279. doi:https://doi.org/10.15294/jejak.v13i2.24228

 Corresponding author: Clement Atewe Ighodaro p-ISSN 1979-715X Address: Departement of Economics, Faculty of Social Sciences, University of Benin, Ugbowo Campus, Benini City, e-ISSN 2460-5123 Edo State, Nigeria

E-mail: [email protected]

266 Ighodaro, C., & Igbinedion, S, Corruption and Economic Growth in West Africa ,

2018). West African countries have been facing INTRODUCTION corruption as one of her major problem to the The main interest for this paper is extent that some policy holders have been using anchored on the premise that corruption is all possible strategies to fight the menaces becoming a public issue in West Africa as globally and regionally through for example, the policy makers, economic and political regulation of public procurement and the analysts as well as the general public have establishment of courts of audit. Corruption has created great awareness on its bad effect to led to wide spread criminality and poverty as any economy. This awareness of corruption well as unemployment through nepotism. problem has taken centre stage in the news Consensus has not been established on and print media which in turn has prompted the empirical relationship between corruption several questions as to the effect of and economic growth for panel of countries corruption on economic growth of West while related studies in West Africa are not Africa. Corruption helps to waste resources common. However, theoretical justification through weak and non – transparent remains ambiguous. Empirical evidences with procurement policy, non-transparent the use of different panel estimation methods allocation of state subsidies and by Boussalham (2018); Gründler & Potrafke Misallocation of talent and resources and (2019); Tidiane (2019) established inverse non transparency of regulations (World relationship between corruption and economic Bank, 1997). In 2009, the African Union growth for 160 countries; 175 countries and reported that corruption drained the region WAEMU region, respectively. This implies that of some $140 billion a year, which according corruption sands the wheel of economic growth to Ribadu (2009) is about 25% of Africa’s in the countries. On the other hand, Saha and official GDP. Corruption, particularly, Sen (2019) found positive relationship and political and public sector corruption has concluded that corruption and economic been a major problem in West Africa. It is growth have direct relationship in autocracies widespread in the societies where poverty as compared to democracies. and unemployment are high and the masses As noted by Gorai (2016), corruption can have lost government trust which has led to be conceptualized based on the perception of widespread crime and political unrest. The the researcher; hence Theobald & Williams report from the corruption perception index (1999) opined that the definition of corruption of 2018 revealed that several countries have is complex because it is not tied to any no impressive results despite government disciplinary allegiance. For example, corruption efforts which in some cases are cosmetic in the public sector is the misused of entrusted because it creates more corrupt act through authority for private gains (Seldadyo & De bribery. Haan, 2006). Corruption occurs in several forms The report is even worse for West like dishonesty, fraud, bribery, embezzlement, African countries because from the blackmailing, nepotism and favouritism which Transparency International report on occurs in different sectors of the economy. corruption of 2018, out of the 16 countries in There are two schools of taught with respect to the region, Nigeria had 27 out of 100 while the relationship between corruption and Ghana scored 41, Cabo Verde scored the economic growth. The first one is of the opinion highest in West Africa with a 57 out of 100, that corruption propels economic growth though, on the average, West Africa ranges through tips and briberies which reduces about 30% (Corruption Perceptions Index, bureaucracies in organization known as “grease

JEJAK Journal of Economics and Policy Vol 13 (2) (2020): 265-279 167 the wheels hypothesis” (Leff, 1964). The important role in the society by speeding up other noted that corruption decreases some difficult process in administration economic growth through prevention of (Johnston, 2000). Ayee (2002), Lo (1993) opined efficiency in production and innovation that the opinion of the functionalist perception known as “sand in the wheel hypothesis” is that it can create political access for those (Mauro, 1998; Svensson, 2005). that are excluded, and perhaps even produce There are several perspectives of people that may assume power that they are not corruption. According to Granovetter (1992), legally bound to have, particularly in certain there is the moralist perspective of government policies. One of the criticisms corruption. The moralist perspective involves against the functionalists’ perception is that the principal and the agent. The principals they did not consider political power, individual are the senior government officials who interest and social structure in their discussion. advise and implement governments’ policy They did not also consider the historical matters as well as plan, organize, direct, perspective of corruption. control and evaluate the overall activities One of the theories of corruption is the governments and its departments. The junior bad apple theory which considers corruption at personnel are the agents, and are those that the individual level. That is, corruption is are cleaners, messengers, those in the clerical determined by the kind of association you keep cadre, drivers and sometime artisans that are implying that bad behaviour begets bad believed to have some privileged information behaviour and bad company begets bad than the principals who may wish to pay company. This results from individual illegally to have access to certain classified shortcomings like greed (de Graaf 2003). Bad information that may not be officially meant apple theory is not very popular because for them. Booth (2012) further buttressed this corruption is almost a normal rather than by noting that the principal and the agent abnormal. This is probably why Punch (2000) problem exist when either of them, most noted that corruption used to be thought of as a especially, the principal requires a service of transient problem rather than permanent and the agent, but the principal does not have referred to it as exceptional ‘problem’ which can the necessary information to oversee the only be removed by ‘surgical’ treatment, as if it performance of the agent in an effective way. was a malignant cancer, to restore an otherwise This information imbalance is as a result of healthy agency (the ‘bad apple’ metaphor). asymmetry of information that arises Another one is the public choice theory that because the agent has more or better was made popular by Rose-Ackerman (1978). information than the principal. She noted that the public worker that is corrupt There are also the moralist and the tries to maximize his potential gain from functionalist perspectives of corruption. The corrupt act, particularly when the potential moralist noted that corruption is an immoral benefit is greater than the potential cost. Hence, behaviour which may make someone to lose Klitgaard (1988) noted that people will continue his or her respect in the society (Gould, to be corrupt when the advantages from being 2002). This is why Nye (1979) noted that corrupt are bigger than the disadvantages. corruption tends to be in favour of close The organizational culture theory is family, private colleagues, among others sociological perspective of corruption which which violate the existing rules. The discusses corruption as it relates to the way of functionalist views corruption as playing an life of the people in the organization, which is

268 Ighodaro, C., & Igbinedion, S, Corruption and Economic Growth in West Africa , corruption at the macro level rather than the countries experience severe crimes and individual level. Meaning that agents that are criminality because informal social controls not corrupt may become corrupt when they break down. The theory predicts that more find themselves in a corrupt environment, crime will occur in neighbourhoods with weak that is corruption is the cause of corruption. social structures, such as failing schools, vacant This is probably why Jackall (1988); Punch or vandalized buildings, changing ethnicity, and (2000) opined that not becoming corrupt in high unemployment (Steenbeek & Hipp, 2011). certain organizational cultures means Johnson (1998) argued that corruption is betraying the group. Hence, Huberts, embedded in the overall society in many Kaptein & Lastuizen (2004) noted that to countries based on the social disorganization fight corruption in organisations, you alter theory. According to the author, in most the organisation’ leadership. countries, political and economic changes may Teveik, Albert, & Charles (1986) introduce corruption rather than stop it. From propounded the policy-oriented theory of the sociological perspective, the social learning corruption from the perspectives of political theory is based on the assumption that the same science and economics with emphasis on learning process can lead to deviance in the government corruption. They noted that society. The social disorganization theory corruption not widely checked leads to more posited that the interactions of variables like corruption and high level of corruption in different associations, modelling, and any economy if not checked may hinder reinforcement determine social behaviour growth of the economy. Similarly, as noted (Singer & Hensley, 2004). Akers & Sellers (2009) by them, individual level corruption such as opined that behaviour is determined by the greed and the likelihood of detection and standards of positive and negative prosecution suggest one set of policies for reinforcement or rewards and punishment reducing corruption. They opined that to under the social learning theory, behaviour and deal with corruption problem in any society, the key variable is peer influence. Bernard, bureaucratic challenges, slow justice and Snipes & Gerould, (2010) suggested that social poor social demands of members of the structure affects crime because it affects one’s society must be dealt with in analyzing exposure to the rules and the consequences of corrupt practices. violating such rules. Bernard, Snipes, & Gerould (2010) In empirical review, the prevalence of opined that the social disorganization theory corruption in the society has been attributed to was propounded as part of the Chicago socio-economic factors amongst others factors. School, a body of theory which focuses on Mo (2001) used data for the period 1970 to 1985 urban sociology in the 1920s and 1930s. The and the ordinary least squares as well as the two theory is based on the assumption that the stage least squares in Hong Kong. They found way people behave is influenced mostly by that the key channel through which corruption one’s environment, and that corruption and affect economic growth is through political other deviant and the environment one finds instability. They also found that corruption also himself due to weak corruption control reduces human capital and share of private mechanism. The theory posits that investment. Ahmed, Ullah & Arfeen (2012) unwarranted behaviour has cultural, attempted to establish the effect of corruption political, and economic causes (Akers & on economic growth of sixty and seventy – one Sellers, 2009). Disorganized communities countries respectively. They used the random such as the case of some of the West African effect model and the General Method of

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Moment (GMM) with, though; the number economic growth, though, they have the of years used in the study was not stated. expected positive sign. D'Amico (2015) They found that both the results for the considered corruption and economic growth in random effect model and the GMM results China provinces and an unbalanced panel. The were relatively the same. The result revealed author used GMM estimation method and an inverted – U between corruption and found that all the variables; illiteracy, life economic growth while secondary school expectancy, population, exports and foreign enrolment rate and gross foreign direct direct investment have the expected positive investment have positive and significant sign except corruption and population growth effect on economic growth. Primary school rate. They were all significant at 1% level of enrolment was found to impact on economic significance. growth inversely. Thach, Duong, & Oanh (2017) examined Amin, Ahmed, & Zaman (2013) used the impact of corruption on economic growth. data for the period 1985 to 2010 to establish They used data of 19 Asian countries in the the relationship between corruption and period 2004 to 2015 and panel data estimation economic growth in Pakistan. The variables techniques. With the use of fixed effect, random used were all integrated of order one. They effect and the dynamic general method of found that expenditure on education and moment, they found that corruption has inverse population growth have significant positive impact on economic growth in Asian countries, relationship with economic growth while though, they noted that bribe given speeds up domestic investment and corruption have administrative process. They further found that significant negative relationship on investment, population, democracy freedom economic growth measured with per capita and economic freedom have direct impact on income. Ola, Mohammed and Audi (2014) economic growth. Ondo (2017) considered the provided an overview of the effect of relationship between corruption and economic corruption on the economic development of growth in the Economic and Monetary Nigeria. The authors noted that there has Community of Central Africa and data within been significant corruption reduction in the period 2005 to 2015.They found that Nigeria as a result of the anti-corruption corruption, civil liberty, human capital and policies put in place, though, no empirical or public spending have inverse relationship with statistical justification of the statement. They economic growth in the community while further noted that corruption demean the private investment and commercial opening image of a country and loss of revenue. have positive relationship with economic Mikaelsson & Sall (2014) examined the growth. While civil liberty and private relationship between corruption and investment were significant at 1% level of economic growth of developing countries significance, corruption was significant at 10% and data for 2002 to 2010. The results showed level of significance and noted that corruption that corruption did not have significant may have a non-linear effect on economic effect on economic growth of the developing growth. countries while democracy impacted on Gründler & Potrafke (2019) provided new economic growth inversely. Furthermore, empirical evidence on the link between education which they proxied by primary corruption and economic growth of 175 school completion rate and life expectancy countries and data for the period 2012 to 2018 were insignificant in the determination of and the use of GMM. They found that

270 Ighodaro, C., & Igbinedion, S, Corruption and Economic Growth in West Africa , corruption and its lag values were consumption expenditure met the a priori consistently significant and negative in the expectation and was significant. determination of economic growth. The The objective of this paper is to found that rail lines, net migration, empirically ascertain the relationship between interpersonal globalization and trade were corruption and economic growth in West Africa significant and positive in the determination since empirical consensus is yet to be of economic growth while economic established while similar study has not been globalization was negatively significant. carried out in West Africa. It is also possible Hoinaru, Buda, Borlea, Vaidean, & that the relationship between corruption and Achim (2020) used panel of 185 countries and economic growth could be U-shaped which has data set for the period 2005 to 2015 to test not been tested in recent studies except Ahmed, the “Sand the Wheels” and “Grease the et al (2012) to the best of my knowledge. Wheels” hypotheses of corruption by examining the impact of corruption and shadow economy on the economic and METHOD sustainable development. They used Let a simple production function be stated as: correlation matrix and found that most of YfLXV= ,,, i =1,2 ,. . . , 1 5 , the variable used were strongly correlated. itititit ( ) The fixed effect and the random effect t = 2000,2001,...,2018. (1) estimation result showed that the Yit is real GDP; measure of economic relationship between corruption and growth of country i at time t . Lit is labour force economic development was not consistent. of country at time . Xit is social and However, they found an inverse relationship macroeconomic determinants like education between corruption and the shadow proxied by primary school enrolment, foreign economy on one hand and the same inverse direct investment, unemployment and labour relationship between corruption and force of country at time . Vit is corruption economic development. The result supports perception index of country at time . the ‘sands the wheel corruption hypothesis’. Bitterhout & Simo-Kengne (2020) did a From (1), a Cobb-Douglas production function panel analysis of the effect of corruption on can be specified as: then economic growth of BRICS countries.  1−− YALXVititititit= (2) They used data from 1996 to 2014 and the fixed effect model and GMM estimation In equation (2), A is used to capture the method to correct endogeneity problem. effects of other factors of production like other They established that corruption and growth determinants used in the estimation. economic growth have direct and significant Though, Solow (1956) used to capture relationship and long run equilibrium technological changes, and he also noted that relationship existed among the variables could be the effect of other factors like war, used for the estimation. The coefficient natural disaster and even economic reforms. estimate of investment was insignificant and Equation (2) can also be stated in log form as: did not meet the a priori expectation. LNY=+++ LNALNLLNXLNV − −  (1) Political stability, population growth rate and ititititit (3) openness were not significant in the determination of economic growth, though were not significant while government

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On the basis of (3), the estimated model is: consists of disbursements of loans made on concessional terms (net of repayments of LNRDGPit = 0 +1LNPSENRit + 2LNODAit principal) and grants by official agencies of the +3LNLBRFit +4LNFDI +5LNCPIit members of the Development Assistance +6LNUNEMit + it (4) Committee (DAC), by multilateral institutions. Where LN before a variable is the log of On the other hand, net official aid received that variable; RDGP = Y is Real gross domestic refers to aid flows (net of repayments) from product (GDP) measure of economic growth; official donors to countries. PSENR = X is Primary school enrolment, LBRF is total labour force. It comprises of measure of human capital development; ODA people of ages 15years and above who supply is Official Development Assistance; LBRF is labour for the production of goods and services Labour force; FDI is Foreign direct during a specified period. investment; CPI = V is Corruption perception CPI is corruption perception index of each index; and UNEM is Unemployment rate. country. It measures the rates of countries’ All the data were sourced from World perceived level of corruption on a scale from 0 Development Indicators, 2018. (highly corrupt) to 10 (clean). The stationarity test was done with the Im, A priori, 1234 , , , 0  ; 56,0. Pesaran & Shin (2003) method. The test allows The data used for the estimation ranged for heterogeneous version of the Dickey Fuller from 2000 to 2018. They were obtained from test (Hall & Mairesse, 2002) and can be stated as: the World Bank Development Indicators (2018). Each of the variables is explained xxitii=++ tit ,1− ;i =1,2,...,15; below: t = 2000,2001,...,2018 (5) RGDP is real gross domestic product, Where: purchasing power parity that is; GDP, PPP (Constant 2011 international US Dollar, $). It  = (1− ii) is a standard measure of the volume of GDP xtx=+++ ; (6) of countries or regions. It can be calculated itii tit ,1− by dividing real GDP by the corresponding Where: purchasing power parity, which is an  is as earlier defined exchange rate that removes price level  =−(1 i) i differences between countries. The panel co-integration method by PSENR is primary school enrolment Pedroni (1999, 2004) was used to establish long represents human capital development. It is run relationship among the variables and can be the total primary school enrolment (boys and stated as: girls) in primary school. It is the ratio of k children of the official primary school age yxi,, tini=++ iti t  for who are enrolled in primary school to the n=1 total population of the official primary school (7) age. ODA is official development assistance. This is net official development assistance and official aid received at 2013 constant US Dollars, $. Net official development assistance

272 Ighodaro, C., & Igbinedion, S, Corruption and Economic Growth in West Africa ,

Where i and t are respectively the Where v and  are respectively error cross section and the number of observations. terms and are assumed to be stationary. The The panel cointegration test is based on panel fully modified estimator for  can be within-dimension or between-dimension modelled as: statistic. The within-dimension based  * − statistics are referred to as panel co- L21i YYYXititiit=−− integration statistics while between-  L22i dimension statistics are considered as group-   mean co-integration statistics. As noted by 00L21i  Where: iii= +21i −−2122  22i Quyoom & Imran (2012), the main strength of   L22i the Pedroni test is that it allows for individual (8) member-specific fixed effects, deterministic 0 • trends and slope coefficients. Where: iiii =  +  +  is the covariance The estimation was carried out with the o matrix; Bi is the contemporaneous covariance; i use of the fully modified ordinary least is the weighted sum of covariance; Li is the lower squares (FMOLS) method first introduced by triangular in the decomposition of Bi Pedroni (2000). The method takes into account both the serial correlation and endogeneity problems that may be present in RESULTS AND DISCUSSION the variable which is not case in the ordinary Table 1 presents the panel stationarity least squares and can modelled as: results using the Im, Pesaran and Shin

YXitiititit=+++ −1 (7)

* N  =N −1 NT ( )( ) t=1 −1 T − Where:  =−Xxiti t=1  2 T − *  =−−XXYTitiiti  i=1  Table 1. IPS Panel Stationarity Result Individual Effects Individual Intercept and Trend Variable Stat. Probability Remark Stat. Probability Remark LNRGDP -0.75350 0.2256 Non 0.51155 0.6955 Non stationary stationary D(LNRGDP) -5.66215 0.0000*** I(1) -6.19437 0.0000*** I(1) LNPSENR -1.12976 0.1293 Non 1.79251 0.9635 Non stationarity stationarity D(LNPSENR) -4.32846 0.0000*** I(1) -3.96906 0.0000*** I(1) LNODA 0.54632 0.7076 Non -0.43137 0.3331 Non stationary stationary D(LNODA) -5.57445 0.0000*** I(1) -4.19422 0.0000*** I(1) LNLBRF -0.19789 0.4216 Non 0.83395 0.7978 Non stationary stationary D(LNLBRF) -1.78801 0.0369** I(1) -2.53103 0.0057** I(1)

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LNFDI -0.25554 0.3992 Non 2.08237 0.9813 Non stationary stationary D(LNFDI) -5.42576 0.0000*** I(1) -3.55453 0.0002*** I(1) LNCPI 0.42865 0.6659 Non -1.01747 0.1545 Non stationary stationary D(LNCPI) -7.22523 0.0000*** I(1) -5.04303 0.0000*** I(1) LNUNEM -0.07205 0.4713 Non -0.24927 0.4016 Non stationary stationary D(LNUNEM) -4.04265 0.0000*** I(1) -2.03559 0.0209** I(1) *** (**) significant at (1%)(5%). Using the individual effects as well as reveals that cointegration relationship exists individual intercept and trend, all the among the variables. variables were not stationary at levels but Table 2. Pedroni Cointegration Results became stationary after first differencing. Within Between This implies that the variables were all of Dimension Dimension order one, that is I(1) PP – -3.127008*** -7.618006*** Out of the seven different statistics for Statistics this test, the Phillips Perron (PP) statistics ADF -2.000571** -7.618006*** and the Augmented Dickey Fuller (ADF) Statistics statistics were used to determine long run *** (**) significant at (1%)(5%) relationship. The result as shown in Table 2 Table 3. Panel FMOLS Result Dependent Variable: LNRGDP Panel (FMOLS) (A) (B) Linear Estimation Quadratic Estimation LNPSENR 1.383701*** 1.367887*** (6.731397) (6.852146) LNODA 0.389758*** 0.415414*** (8.147296) (8.810423) LNLBRF 2.576171** 1.934027* (2.185826) (1.662081) LNFDI 0.067982 -0.096437 (0.6964) (-0.549617) LNCPI 0.563435*** -4.116935** (4.406182) (-2.408937) LNCPI^2 0.696312** (2.737410) LNUNEM -0.036260 -0.038258 (-0.462133) (-0.502417) R2 0.963712 0.964699 Adj. R2 0.960797 0.961709 ***(**)* 1%(5%)10% sig. respectively. ( ) the t-statistic

274 Ighodaro, C., & Igbinedion, S, Corruption and Economic Growth in West Africa ,

The panel FMOLS shows that all the realised in improved technological educational control variables were significant in the practice which shows the importance of determination of economic growth except educational attainment. Similarly, Bils, & FDI and unemployment rate. Both Klenow (2000) used a model that is calibrated to estimations (linear and quadratic) showed quantify the strength of the effect of schooling that primary school enrolment (LNPSENR) on growth by using evidence from the labour proxy for human capital development was literature on Mincerian returns to education. significant at one percent level of significance They constructed construct human capital and has direct influence on economic growth stocks for individuals of each age between 20 of West Africa. The result showed that a one and 59, using (13) and incorporating schooling, percent increase in primary school experience, and teacher human capital specific enrolment, which is improved human capital, to each age for as many countries they could get. would increase economic growth by about They opined that high enrolment rate leads to 1.4% respectively in both estimations. The faster improvement in productivity which means result is contrary to the one obtained by that faster growth in real gross domestic product Amed, et al (2012) who found primary school resulted from countries with high enrolment in enrolment to impact on economic growth schools. The results further reinstated the inversely contrary to the one established importance of education in enhancing economic when they attempted to establish the effect of growth as earlier noted by (Schultz, 1961). corruption on economic growth of sixty and ODA has significant and direct influence seventy – one countries with the use of panel on economic growth and showed that an data [the random effect model and the increase in ODA by say, one percent will General Method of Moment (GMM)]. increase economic growth by less than one Contrary result was also found by Ondo percent in both estimations. It affirms the earlier (2017) who found negative but significant one obtained by Moolio & Kong (2016) when relationship between human capital they applied panel fully modified ordinary least development and economic growth in his squares (FMOLS) and panel dynamic ordinary study of the relationship between corruption least squares (DOLS) estimators to determine and economic growth in the Economic and the magnitude of long run relationship between Monetary Community of Central Africa and foreign aid and economic growth in Cambodia, data within the period 2005 to 2015. The Lao PDR, Myanmar, and Vietnam using panel result further confirmed the one obtained by data from 1997 to 2014. They found positive and Nelson & Phelps (1966) who noted that significant link between official development educated workforce may better understand assistance and economic growth in the four the use of technology compared to Asian countries. uneducated one as this will further boost Labour force (LNLBRF) also significantly economic growth in their study of investment impacted on economic growth. An increase in in humans, technological diffusion and labour force by about one percent will increase economic growth. Nelson & Phelps (1966) economic growth by less than three percent used two models of technological diffusion, while foreign direct investment has mixed result that is a production function with labour in terms of the signs of the parameter estimates augmenting with the assumption that in the linear and quadratic estimations. technical progress is wholly disembodied and However, the positive result confirms the earlier the second model which states the rate at one obtained by D’Amico (2015) who found which the latest theoretical technology is

JEJAK Journal of Economics and Policy Vol 13 (2) (2020): 265-279 175 positive and significant relationship between After a while the negative impact may get to a FDI and economic growth. critical level where for example, the same With respect to corruption variable, bribery will help to overcome unnecessary there was a mixed result with respect to the government regulations and red tapism. Red parameter estimates on the linear and non- tapism refers to over regulation also known as linear models. The result of the linear model rigid conformity to formal rules that are showed that corruption has direct influence bureaucratic which may prevents action or on economic growth and that an increase in decision-making process. Rigid conformity lends corruption perception index by one percent credence to inefficient officials who take bribes will increase economic growth by less than for services that are supposed to be free. Red one percent. The result affirms the one earlier tape may be frustrating; however, it sometimes obtained by Ahmad, Ullah, & Arfeen (2012) provides social benefits. Red tape does not come for 60 developed and developing countries as up because of incompetence of bureaucrats but well as 71 developed and developing to ensure that government processes are economies. This result further ascertained representative and accountable and to meet the the theory of Leff (1964) who opined that demands, often fragmented, of citizens and corruption is oil that greases the wheels of interest groups (Anti-Corruption Digest government. Those in favour of the greasing International, 2018). hypothesis argued that corruption facilitates trade that may not have happened otherwise and that it promotes efficiency by allowing CONCLUSION private sector agents to circumvent The paper empirically examined the cumbersome regulations, hence, promotes relationship between corruption and economic economic growth. However, those opposing growth in fifteen West Africa countries. Data for this view noted that the greasing effect of the period 2000 to 2018 and the panel fully corruption is only possible as a second best modified ordinary least squares were used for option in a bad institutional setting (Campos the estimation. The variable used were & Dimova, 2010). It is contrary to the result integrated of order one and there is obtained by Boussalham (2018) and Tidiane cointegration relation among the variables. (2019, Ondo (2017), Grindler et al (2019) and Labour force was the most important variable Bitterhout (2020) who found inverse that impacts on economic growth positively in relationship between corruption and terms of the parameter estimate. With respect economic growth. to the linear estimation, corruption has direct In the non-linear estimation, corruption relationship with economic growth thereby variable exhibited u-shape. It shows an supports the hypothesis that corruption greases inverse relationship with economic growth, gets to a critical lower level and later impacts the wheels of economic growth rather than sand positively, which implies that different level the wheels of economic growth. As per the of corruption affect economic growth quadratic estimation, the U-shaped relationship differently. It implies that initially, corruption between corruption and economic growth was will impact inversely on economic growth supported. through bribe taking which may lead to Based on the results estimates, the unfair competition and may prevent new following are recommended. Official opportunities and promote rent seeking. development assistance to West African

276 Ighodaro, C., & Igbinedion, S, Corruption and Economic Growth in West Africa , countries should be effectively managed in https://anticorruptiondigest.com/2018/0 such a way that it is not misused for activities 4/05/red-tape-dynamics-of-corruption/ that are not necessary through corrupt act. Ayee, J. (2002). Political and social consequence In addition, labour force should be of corruption: In Corruption and encouraged through incentive like increased development in Africa. Proceedings of a salaries and allowances as this will directly Seminar Organized by the Ghana impact on economic growth. Rising Academy of Arts and Sciences with unemployment in the region should be Friedrich Ebert Foundation, June. curtailed through programs that will Bitterhout, S. & Simo-Kengne, B.D. (2020). The encourage self employment like skill effect of corruption on economic growth development. Though, from the result, in the BRICS countries. A panel data corruption impacts on economic growth analysis. Economic development and positively, it may not lead to efficient well-being research. EDWRG Working outcomes because of cutting of corners and Paper Series, Working Paper Number probably breaches of protocols. Therefore, 03-2020, 1 – 23. January corruption should not be encouraged at any Bernard, T. J., Snipes, J. B., & Gerould, A. L. level of governance. Interest group or (2010). Vold’s theoretical criminology political influences should not be taken into (6th ed.). York, NY: Oxford University consideration when fighting corruption at Press. Blasius, J., & Brandt, M. (2010). any level. Most importantly, offenders should Representatives in online surveys be brought to book through constitutional through stratified samples. Bulletin de means. Methodologie Sociologique, 107, 5-21. Booth, D. (2012). Development as a collective action problem: Addressing the real REFERENCES challenges of African governance. Ahmad, E., Ulla, M. A. & Arfeen, M. I. (2012). Synthesis Report of the Africa Power Does corruption affect economic and Politics Programme. London: ODI. growth? Latin American journal of Boussalham, H. (2018). The consequences of economics, 49(2), 277 – 305. corruption on economic growth in Akers, R. L., & Sellers, C. S. (2009). Mediterranean countries: Evidence from Criminology theories (5th ed.). NY: Panel data analysis. Available at: Oxford University Press. doi:10.20944/preprints201802.0065.v3 Amin, M., Ahmed, A. A., & Zaman, K. (2013). Brunetti, A., & Weder, B. (2003). A Free Press is The relationship between corruption Bad News for Corruption. Journal of and economic growth in Pakistan — Public Economics, 87, 1801-1824. Looking beyond the incumbent. Campos, N. & Dimova, R. (2010). Corruption Oeconomics of knowledge, 5(3), 16 – does sand the wheels of growth. The 45. Centre for Economic Policy Research, Anti-Corruption Digest International (2018). CEPR Policy Portal. Available at: Red tape: dynamics of corruption. https://voxeu.org/article/does- Anti-corruption digest international corruption-sand-or-grease-wheels- risk & compliance news. April 5th. economic-growth Available at:

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