An Empirical Approach To The Determinants Of Corruption Using Panel Data Analysis

People nowadays are concerning about corruption, not only because it hinders development and economic growth, but also it is considered the main reason for the growing of illegal business and mafias. In this paper, we construct the more recent new data set which includes60countries over a span of11years; between2000and2010. For the analysis purposes, the fixed effects regression will be the main tool for regression analysis of panel data to identify the main determinants of corruption. The Results show that income, government expenditure and political stability are significant with negative effect on corruption, while civil liberty, schooling and mineral rents are insignificant.To solve the endogeneity problem of income, we tried our best to find the right instrument that can fit our data; one instrument is found helpful in this paper which is the RGDP per capita of great importer in2000. The results show that the effect of income on corruption is found to be much important and ignoring the correction of endogeneity makes our estimates to be severely biased.