Corruption, Government Spending and Economic Growth: The Case of Central and Eastern Europe

Abstract

This study delves into the relationship between corruption, government spending, and economic growth in selected Central and Eastern European countries. The high prevalence of corruption and suboptimal allocation of public resources in these countries present a significant obstacle to increasing economic growth. These issues are particularly impactful in low and middle-income countries, where corruption persists longer. The effects of corruption can distort market signals and lead to inefficient allocation of resources, especially in the public sector. In addition to hampering public consumption, corrupt practices negatively impact a country's ability to increase economic growth and bridge the gap between high and low-income countries. By utilising fixed and random effects methods, this paper employs panel regression analysis to examine the impact of government spending and corruption on the economic growth of selected Central and Eastern European countries from 2011 to 2021. The study found that government spending, corruption perception, and control of corruption have a positive and statistically significant influence on economic growth in the selected countries.