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Journal of Undergraduate Research

Keywords

corruption, developing economy, Armenia, economic trade

College

Marriott School of Management

Department

Finance

Abstract

In our research we have attempted to address the negative impacts of corruption on economic development, trade and foreign direct investment in developing economies. Historically, it has been argued that political corruption is a very significant hindrance of economic development, especially in transitional economies. Economists from major organizations and institutions have performed numerous empirical analyses finding the negative correlation between corruption and economic performance measured in GDP. They have found this correlation to be especially significant when foreign direct investment is a factor of development. Assumptions have been formed that investors avoid corrupt economies due to business insecurities and the high costs associated with bribes and other corrupt practices in developing countries. Furthermore, it has been outlined that where corruption is present, trade of goods and services is limited due to the protectionist acts financed by domestic producers. In our study we have attempted to test these assumptions in a sample regression analysis and with a case study of a developing country, Armenia, which has had continual decline in its corruption indices for the last several years.

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