Abstract

In some countries, corrupt politicians appear to choose investment projects based on the opportunity for bribes and kickbacks these projectspresent. This paper contends that such corruption increases the numberof capital projects undertaken and trends to enlarge their size andcomplexity. The result is that, paradoxically, some public investmentcan end up reducing a country's growth.

The Economic Issues Series

Vito Tanzi is Director of the Fiscal Affairs Department of the IMF. He holds a Ph.D. in economics from Harvard University.

Hamid Davoodi is an economist in the Fiscal Affairs Department of the IMF. He graduated from the London School of Economics and Political Science and holds a Ph.D. from the University of Wisconsin, Madison.

How Corruption in Public investment Hurts Growth