Public Investment Growth &corruption

Public Investment Growth &corruption - Corruption &...

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Serious PI Corruption in China By By Liu Jia (o ) ID(1401336) of GMBA 1
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Abstract: The Public Investment has growth year by year,may be there are some objective reasons, there are some cases showed that more PI increased, more corruption exist. In many countries, especially developing countries corruption is pervasive, especially capital projects. Like China, this phenomenon is very seriously. In this paper, i examine corruption affect the growth effects of public investment growth. Our methodology improves on previous research on this topic by explicitly recognizing the role of simultaneity between growth of public investment, corruption and the possible biases arising from omission of correlated variables from the single reduced form equation based analysis. Also I want to show China as the typical example to talk the public corruption, especially construction corruption. Then I could get results by the research: There is the positive relationship between public investment growth and corruption but not significant. Keywords: Corruption, China, public investment growth, 2
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1. Introduction Szeftel(1998) cited in Shakantu(2003) offers a working definition of corruption as the “behaviour which deviates from the norms, rules and duties governing the exercise of a privileged role or office for purposes of private gain. In many developing countries corruption is pervasive, in particular in the projects involving the public sector. Reports of public sector corruption by the local or external press typically contain two elements: details of the exaggeration of the cost of public investment projects, or the use of inferior materials, and often both. The construction market is most susceptible to corruption. It is nearly impossible to keep track of the entire network of actors involved in public procurement of construction projects and it is a major challenge to control how public money is spent. Thus, corruption can occur easily and be hidden relative effectively. This paper is concerned by the issue typified by the above two quotations: corruption inflates the level of expenditure on public capital projects such as roads, but lowers the returns to that capital; in this case because they either go nowhere or they are of low quality. Over the past two decades, a substantial volume of theoretical and empirical research has been directed towards identifying the elements of public investment that bear significant association with economic growth. The general factors to raise growth in these models are as follows: public investment in infrastructure (e.g., roads and highways, water supply, airports, etc.) and education…. In this paper I focus on the effect of corruption on public investment. i focus on this component of government expenditure because, unlike much of current spending, capital spending is generally discretionary (in terms of size of the budget, the choice of projects and the location of projects) and therefore more
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This note was uploaded on 06/15/2011 for the course RGER 2312423 taught by Professor Vhsfd during the Spring '10 term at American University of Sharjah.

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Public Investment Growth &corruption - Corruption &...

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