The Impact of Anti-Corruption Policies on Human Development

Abstract

In many developing countries, corruption constitutes a systemic economic problem with severe consequences for economic growth and broader measures of development. This thesis seeks to address the grand challenge of corruption by examining the impact of anti-corruption policies on human development – as measured by the Human Development Index - in developing and transitioning countries. Drawing on a theoretical framework that combines principal-agent theory and collective action theory, conventional anti-corruption policies based on the former theoretical approach are hypothesized to have a positive impact on development. Based on the latter theory, informal institutions relating to trust and civil cooperation are similarly hypothesized to have a positive impact on development. Finally, the existence of strong informal institutions is hypothesized to interact with anti-corruption policies and lead to a further increase in the impact of such policies on human development in developing and transitioning countries. The empirical study of this thesis uses fixed effects models to estimate the extent to which anti-corruption policies affect human development and relies on panel data observations for a sample of 133 developing and transitioning countries in the period 2005-2019. The analysis finds that anti-corruption policies have a comparatively large positive effect on Human Development Index scores. Strong informal institutions are also found to have a positive impact on human development, albeit slightly smaller than anti-corruption policies. While the existence of an interaction effect between anti-corruption policies and informal institutions receives strong support, these interaction effects are found to be negative. Whereas both anti-corruption policies and informal institutions are found to individually have strong effects on HDI scores, this interaction indicate that these effects diminish slightly when effective anti-corruption policies and strong informal institutions co-exist.