Physical Technology, Business and Public Sector Corruptions, and Growth: The Sensitivity Analysis Using Korea’s Time Series Data for 1986-2008
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With Korea’s annual data from 1986 to 2008, the regression results are found to be consistent with the hypothesis that business corruption and public sector corruption have detrimental effects on growth. In a comparison between two indicators of corruption, business corruption is more important factor than public sector corruption in explaining the growth. The Stock-Watson causality test indicates that two causal relationships between each pair of corruptions exist; reducing one is likely to result in reductions in the other, implying that business and public sector corruptions may be one package in policy formulation. It is also evident that growth is enhanced at a faster rate with reduced business and public sector corruptions as physical technology is developed. Given the interaction term, physical technology is more sensitive to business corruption than to public sector corruption. The results from the estimated error correction model suggest that each of business and public sector corruptions has a contemporaneous effect as well as a long-term effect.
Abstract
With Korea’s annual data from 1986 to 2008, the regression results are found to be consistent with the hypothesis that business corruption and public sector corruption have detrimental effects on growth. In a comparison between two indicators of corruption, business corruption is more important factor than public sector corruption in explaining the growth. The Stock-Watson causality test indicates that two causal relationships between each pair of corruptions exist; reducing one is likely to result in reductions in the other, implying that business and public sector corruptions may be one package in policy formulation. It is also evident that growth is enhanced at a faster rate with reduced business and public sector corruptions as physical technology is developed. Given the interaction term, physical technology is more sensitive to business corruption than to public sector corruption. The results from the estimated error correction model suggest that each of business and public sector corruptions has a contemporaneous effect as well as a long-term effect.
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