Institutional quality and endogenous economic growth

Abstract

Purpose - This paper seeks to investigate the relation among corruption, institutional quality and economic growth. Design/methodology/approach - It expands the Erlich and Lui (JPE) endogenous growth model. From this model, institutional aspects such as judicial corruption, bureaucracy, democracy and income inequality are introduced into the analysis in order to identify the institutional conditions that may inhibit corruption and stimulate economic growth. Findings - It was demonstrated that the magnitude of the marginal effect of bureaucratic corruption on growth crucially depends on other institutional aspects of the economy and that judicial corruption amplifies the perverse effects of bureaucratic corruption. Originality/value - The paper explains why some countries with a lot of corruption grow at high rates. In that sense if a country has only a lot of judicial or bureaucratic corruption it may grow at high rates but, when these two kinds of corruptions occur at the same time, then the economy will be at a low-growth pitfall. © Emerald Group Publishing Limited.