The determinants and effects of corruption: Structural equation modeling

Corruption is the abuse of economic and social facilities or the public authority with the purpose of gaining personal advantage. Corruption is such a concept that came out in different forms in all societies throughout history. In comparison with developed countries, its prevalence level is higher in underdeveloped and developing countries. This thesis has two purposes. First, in the light of academic studies in literature, analyzing political and socio-cultural factors of corruption and in which direction and size (or extent) those factors determine corruption. Second, analyzing the extent (or size) and the direction of corruption`s economic and political effects. Study covers 159 countries in the period of 2008-2012. In the study that structural equitation model was applied, there are 5 important findings. First of them is, there is a negative and significant relationship in between corruption and the corruption`s economic determinant latent variable that created from GDP per capita, public expenditures and price level variables. Second of them is, there is a negative and significant relationship in between corruption and the corruption`s political determinant latent variable that created from superiority of law, political stability, effectiveness of government, quality of regulatory and accountability variables. Thirdly, there is a significant and negative relationship in between corruption and corruption`s socio-cultural determinant variable that created from average lifespan, schooling rate, ethnic origin, rural population and religion variables. In the study effects of corruption analyzed by dividing it into two parts; fourth, it is found that corruption affects negatively and statistically significantly the latent variable that created from GDP per capita, economic freedom, public expenditure and economic growth variables. Fifth, corruption affects negatively and statistically significantly the latent variable that created from superiority of law, political stability, effectiveness of government, quality of organizer regulatory and accountability variables.