Effects of corruption on military expenditures. Empirical evidence from different income level countries
| Pages | 774-785 |
| DOI | https://doi.org/10.1108/JFC-09-2018-0092 |
| Published date | 02 July 2019 |
| Date | 02 July 2019 |
| Author | Imtiaz Arif,Lubna Khan,Syed Ali Raza |
| Subject Matter | Financial risk/company failure,Financial crime |
Effects of corruption on
military expenditures
Empirical evidence from different
income level countries
Imtiaz Arif,Lubna Khan and Syed Ali Raza
Department of Business Administration, Iqra University, Karachi, Pakistan
Abstract
Purpose –This study aims to investigate the effectof corruption on military expenditures in three income
level countries. An annual dataseries of 97 countries covering high-income, middle-income, and low-income
regionsfrom 1997 to 2015 is used.
Design/methodology/approach –The cross-sectionaldependency and integration property of the data
series was checkedbefore applying the generalized method of moments approach to test the model.
Findings –The results of the system generalized method of moments approach suggest that corruption
increases the militarybudget of high-income countries, whereascorruption reduces the military budgetof the
middle-and low-income countries.
Originality/value –This paper offers somesubstantial implications for the policymakers of eachincome
group to curb corruptionand improve economic development.
Keywords Corruption, Military expenditure, Urbanization, GDP per capita, Investment,
Government use of goods and services
Paper type Research paper
1. Introduction
Corruption has becomea significant concernfor both developed and developing nations. It is
an old phenomenon that distorts the economic activities and creates several economic
problems. As corruption plays a crucial role in the economy, it has become a widely
discussed topic in the field of economics. In recent years, therehave been numerous studies
conducted, to understand the cause and effect of corruption. The existing literature on
corruption can be divided into two strands: the first strand is comprises studies that focus
on the determinants of corruption. Rijckeghem and Weder (1997) found that rule of law,
worker salaries; Leite and Weidmann (1999) noted accessibility of natural resources;
Krueger (1993);Bhagwati (1982) identified bad bureaucracy, and industrial policies, Rauch
and Evans (2000) Tanzi (1998) recognized that lack of transparency, are the few
determinants of corruption.
However, the second strand of literature turns the attention from the determinants of
corruption to the consequences of corruption.Agostino et al. (2016);Blackburn et al. (2010);
Mo (2001);Mauro (1995);Shleifer and Vishny (1993) Murphy et al. (1993) have investigated
the effect of corruption on economic growth; Habib and Zurawicki(2002) and Wei (1997) on
foreign direct investment; De la Croixand Delavallade (2009);Kenny (2009);De la Croix and
Delavallade (2007);Tanzi and Davoodi (1998) and Mauro (1996), among others, on public
investment and infrastructure; and Dincer and Gunalp (2012) and Gupta et al. (2002) on
poverty and income inequality. All these empirical studies have revealed that corruption is
JFC
26,3
774
Journalof Financial Crime
Vol.26 No. 3, 2019
pp. 774-785
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-09-2018-0092
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