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Corruption and distortion of public expenditures: Evidence from Africa

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  • Harouna Sedgo
  • Luc-Désiré Omgba
Abstract
This study investigates the effect of corruption on the trade-off between capital and current expenditures in a panel of 48 African countries over the period 2000-2016.Based on statistical yearbooks, we compile disaggregated data on public finances for African countries and find that a high prevalence of corruption distorts the composition of public expenditures at the expense of the share of capital expenditure. Specifically, an increase in corruption by one standard deviation is associated with a decrease in the proportion of capital expenditure from 29\% to 16\%. The results are robust to various specifications and estimation methods, including the fixed effects and instrumental variables approach. The supportive argument demonstrates that it seems more beneficial for corrupted bureaucrats to manipulate public spending in favor of current rather than capital expenditures. The latter relies on formal and traceable procedures, whereas current expenditure is known to be more open to the use of discretionary allocation.

Suggested Citation

  • Harouna Sedgo & Luc-Désiré Omgba, 2021. "Corruption and distortion of public expenditures: Evidence from Africa," EconomiX Working Papers 2021-7, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2021-7
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    More about this item

    Keywords

    Corruption; capital expenditure; current expenditure; public expenditure; Africa;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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