Corruption in Albania Quantitative Analysis of the Impact on Economic Growth - Economicus

by, Giacomo Morabito

Abstract

Corruption is usually considered a strong constraint on economic growth and development. According to research by Transparency International, the Southern Europe is one of most corrupted regions, and corruption is particularly high in the former socialist states. In particular, corruption in Albania is still considered highest among the Balkan countries. Corruption affects the daily lives of Albanian ordinary people in their dealings with public administration. The high and regular incidence of corruption in public life, and other abuses of power, slows down the process of democratization. Therefore, the European Union has allocated funds to support the judiciary in combating corruption. In 2012, the Transparency International Report ranked Albania as the most corrupt country in Europe, and also as one of the most corrupt countries in the world. According to the vast array of academic literature, the effect of corruption on economic growth is negative and statistically significant. However, recent empirical studies find that the direct effect of corruption on growth is statistically insignificant. This paper investigates the impact of corruption on economic growth in Albania using a panel data set over the period from 2005 to 2014. Measuring corruption statistically is very complex, and almost all known models for the measurement of corruption are based on perceptions of some categories of the population, such as the Corruption Perception Index. Corruption certainly affects negatively the economic growth of Albania, but perception-based indicators are not completely reliable. Therefore, the aim of this paper is how corruption is statistically relevant after a statistical comparison of the results obtained from the use of two different proxies for measuring corruption in Albania. In fact, in addition to the Corruption Perception Index, are considered the statistics on corruption on the basis of criminal proceedings by the judiciary in Albania as a proxy for corruption.