An analysis of the impact of corruption on economic growth, foreign direct investment and domestic investment in the Middle East and North Africa region economies

This thesis aims to investigate the impact of different facets of corruption on economic growth, foreign direct investment (FDI) and domestic investment (DI) in the Middle East and North Africa (MENA) economies. The main purpose of the first empirical chapter is to assess the influence of bribes, abuse of public office, nepotism and the government's efforts in fighting corruption on the real GDP per capita, using a sample of 16 countries from the MENA region over different periods from 2003 to 2016. To overcome endogeneity and simultaneity issues between corruption and economic variables, the Two-Stage Least of Squares model (2SLS) is mainly used in this study. The misuse of public office for private gain, illegal payments (bribes) and corrupt practices in the public sector, are shown to negatively influence the real GDP per capita in the MENA region. The second empirical chapter examines, the impact of the abuse of authority, the existence of illegal payments, nepotism in the public sector and the governments' ability to contain corruption on FDI inflows in the context of 17 MENA economies for different periods during 2003-2016. The results for 2SLS model show that illegal payments (bribes), misuse of public office for private gain and patronage and nepotism, also have negative impacts on foreign direct investment in the MENA region. These kinds of corruption decrease the capital inflow and increase the risks of carrying out investment activities in the host country. Finally, the third empirical chapter assesses the influence of bribes, abuse of public office and nepotism on domestic investment in 14 MENA countries over the period 2003-2016. The results of 2SLS model indicate that corruption could affect negatively on domestic investments through two channels, namely: illegal payments (bribes) and the abuse of public office for private gain.