Corruption in Emerging Markets: A Multidimensional Study

Abstract

The role played by emerging markets in the global economy is well documented. However, these markets' rapid economic development has not always been followed by commensurate advancements in their legal, political, and social institutions, which can lead to higher levels of corruption. Essentially, emerging markets may not possess the necessary governance mechanisms to deal adequately with this problem. As such, this paper uses a number of established indices to measure the relationship between corruption and a myriad of economic, financial, social, and political dimensions. A number of hypotheses linking corruption in emerging markets to these dimensions are developed and subsequently tested. We find that market growth rate, market intensity, market receptivity, commercial infrastructure, reduced country risk, and economic freedom are associated with lower levels of corruption in emerging markets. Our study adds to the expanding literature on corruption by including variables that have not been tested before, and by focusing on how graft influences emerging markets. We conclude with a discussion of policy implications that are related to our findings.