Is Corruption Sand or Grease for Pakistan?

Abstract

Theoretical work has support trustworthy grounds to believe that corruption annihilates the economic growth with the passage of time. Empirical investigation of respective theories has conducted to explore relationship between corruption and different aspects of economic development by manipulating cross-country large conclusive tests. Considerable investigation presumes, development models are evenly impacted by corruption. The focus of following study is to explore the relationship of corruption and economic growth in Pakistan over the time period of 1984-2017. Firstly, we have extended neoclassical growth model by incorporating human capital formation and government sector explicitly. After that, we have integrated corruption in to extended model employing a particular dynamic form for TFP (total factor productivity) and other mediums to exhibiting the consequences of corruption on economic development. After empirical investigation of the presence of a co-integration we employed ARDL Bounds test approach. The bound test identified that there is co-integration exist between the economic developments, corruption and other determinates of growth during this time span. The results proved that corruption has absolute pessimistic effect on economic development of Pakistan.