Is Corruption Perception Index Biased? An Ethnicity Based Analysis (Policy)

1. INTRODUCTION

Corruption is a widespread problem that affects many countries across the world. The broad definition of it is the misuse of public authority for personal benefit, which results in an allocation of resources that is less efficient than would occur in a corruptionfree environment. Corruption has a negative impact on economic growth, investment, and social development in several ways. First, corruption reduces the efficiency of public institutions and distorts resource allocation. Second, it discourages foreign investment and can lead to capital flight. Third, corruption undermines the rule of law, which is essential for economic growth. Ethnicity and economic growth are two important factors influencing corruption levels in a country. Therefore, understanding the factors contributing to corruption is essential for policymakers to develop effective measures to combat it. This research report investigates the relationship between economic growth, ethnicity, and panel-country corruption levels. Specifically, it seeks to answer the question: do economic growth and ethnicity explain the differences in panel-country corruption levels?