Eur. Phys. J. B 63, 547-550 (2008)
https://doi.org/10.1140/epjb/e2008-00210-2

Influence of corruption on economic growth rate and foreign investment

¹ Department of Physics, Faculty of Civil Engineering, University of Rijeka, 51000 Rijeka, Croatia
² Zagreb School of Economics and Management, 110 Zagreb, Croatia
³ Center for Polymer Studies and Department of Physics, Boston University, Boston, MA, 02215, USA
⁴ Institute of Solid State Physics, Bulgarian Academy of Sciences, 1784 Sofia, Bulgaria

Corresponding authors: ^a bp@phy.hr - ^b plamen@buphy.bu.edu

Received: 9 December 2007
Revised: 23 April 2008
Published online: 4 June 2008

Abstract

We analyze the dependence of the Gross Domestic Product (GDP) per capita growth rates on changes in the Corruption Perceptions Index (CPI). For the period 1999–2004 for all countries in the world, we find on average that an increase of CPI by one unit leads to an increase of the annual GDP per capita growth rate by 1.7%. By regressing only the European countries with transition economies, we find that an increase of CPI by one unit generates an increase of the annual GDP per capita growth rate by 2.4%. We also analyze the relation between foreign direct investments received by different countries and CPI, and we find a statistically significant power-law functional dependence between foreign direct investment per capita and the country corruption level measured by the CPI. We introduce a new measure to quantify the relative corruption between countries based on their respective wealth as measured by GDP per capita.