Dominik H. Enste and Christina Heldman
In this chapter, the authors study the consequence of corruption, which are numerous, nefarious, and debilitating. They trace corruption’s effects on private investment, foreign direct investment and capital inflows, foreign trade, government expenditures and services, gross domestic product, inequality, and the shadow or underground economy. These effects are not straightforward and the evidence is not always consistent, and poorly functioning economies may generate corruption as much as corruption retards economic growth. However, there is convincing proof that corruption rewards a few officials but makes everyone else poorer.