The role of corruption in economic growth and public debt

Klodian MUÇO & Marsida VISHKURTI

According to Kaufmann (2010), public officials tend to stimulate large investments in infrastructure. This is achieved with an increase in public spending and debt growth. Corruption, according to him, causes an increase in debt stock and consequently increases the costs for future debt repayment. All of this can often lead to a vicious circle of corruption and public debt growth. Based on the above studies, this paper examines precisely the influence of corruption in public debt and economic growth. The results suggest that corruption leads to the growth of public debt and restrains economic growth. In the empirical analysis, we verify the channels that lead to public debt growth, such as increasing government spending, increasing the informal economy. The final objective of this paper is to empirically verify the idea that in developing countries, such as Albania, corruption is a restrainer of economic growth and a catalyst for the growth of public debt.