ABSTRACT. Scholars have long suspected that political processes such as democracy and corruption are important factors in determining economic growth. Studies show, however, that democracy has only indirect effects on growth, while corruption is generally accepted by scholars as having a direct and negative impact on economic perfor-mance. | International Political Science Review 2006 Vol 27 No. 2 121-136 Corruption Democracy and Economic Growth A. Cooper Drury Jonathan Krieckhaus and Michael Lusztig Abstract. Scholars have long suspected that political processes such as democracy and corruption are important factors in determining economic growth. Studies show however that democracy has only indirect effects on growth while corruption is generally accepted by scholars as having a direct and negative impact on economic performance. We argue that one of democracy s indirect benefits is its ability to mitigate the detrimental effect of corruption on economic growth. Although corruption certainly occurs in democracies the electoral mechanism inhibits politicians from engaging in corrupt acts that damage overall economic performance and thereby jeopardize their political survival. Using time-series cross-section data for more than 100 countries from 1982-97 we show that corruption has no significant effect on economic growth in democracies while non-democracies suffer significant economic harm from corruption. Keywords Corruption Democracy Economic growth Political economy States It is no great insight to proclaim that liberal democracies tend to be wealthier than non-democracies. Since the end of World War II a great deal of scholarly effort has gone into exploring the relationship between economic growth and liberal democracy with many pursuing an obvious explanation for their association namely that democracy facilitates wealth by stimulating economic While intuitively appealing reality suggests the relationship is more complicated. Indeed a number of studies find no direct statistically significant relationship between democracy and economic growth although democracy appears to have important indirect influences on growth due to its positive effect on such things as educational expenditure life expectancy and political stability Baum and Lake 2003 Helliwell 1994 Kurzman et al. 2002 . This does
