Governance and Business Strategy Essay Example | Topics and Well Written Essays - 1500 words

Governance and Business Strategy - Essay Example It leads to the expansion of the hidden economy not only not only because of tax rates or social security rates, but for the arbitrary and inefficient implementation of regulatory and tax regimes in the economy with the existence of corruption. Having implications on the various aspects of the economy, the present project seeks to bring forth these implications of corruption in the economy. Critical reviews are provided with regards to the implications of corruption on the economic development of a nation (CSD, 2005, p.73). Corruption and Economic Development-Critical Analysis The empirical and theoretical debate on the effects of corruption on the economic development of nations remains unclear and unresolved. Available nationwide evidences show that the economic implications of corruption on economic development of nations can be either positive or negative. Previous empirical literature has tried to explore the relationship between corruption and development in great detail and ha s come up with surprising results. It is seen that corruption affects developing and developed countries differently. This is on account of the fact they differ significantly in terms of their economic and cultural characteristics but are plagued by similar levels of corruption in their economies (Kutan, Douglas & Judge, n.d., p.2). Some researchers have argued over the fact that corruption has negative effects on the economic development of nations as it redirects the nation’s resources into unproductive directions and consequently distorts the normal functioning of the economy. Tanzi and Davoodi (1997) has out firth four different channels through which corruption can have damaging implications over the economic growth of nations. These are high public investments; low revenue by the government; low expenses on business maintenance and operations and; poor quality of public infrastructure. On the other hand, some researchers have declared that corruption can be economically favourable in certain nations under certain circumstances as it triggers efficient government services in the form of bypassing such aspects like inefficient regulations and red tapes (Kutan, Douglas & Judge, n.d., p.3). Bureaucratic corruption can also be influenced by economic development. This is considered to be two-way causality and can be demonstrated through threshold effects as well as multiple equilibrium which form grounds for varying incidence of corruption across different countries (Blackburn, Bose & Haque, 2005, p.21). Implications of corruption on the economic activities are studied from many different perspectives. Mauro (1995), has tried to identify the effects of corruption and various other institutional factors includes red tapes, efficiency of the judicial system, political stability on the economic development of 67 nations across the world between the period 1980 and 1983. This analysis revealed that corruption reduced private investments considerably. Influe ncing investments corruption alters the composition of the government expenditures particularly reducing its share on its spending on education in the economy. Research conducted by Tanzi and Davoodi (1997) revealed that high corruption causes higher public investments, low revenues for the government, low expenditures on maintenance and o