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Corruption and Economic Growth in West Africa

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Corruption and Economic Growth in West Africa 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,
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