Abstract

The paper examines whether openness of the economy leads to reduction in corruption using a panel estimation of 31 Asian countries and further estimate its impact on South Asian nations and in the case of India. Specially, we provide an insight to the changes in the level of perceived corruption, democracy, openness and economic development. The focus is not only on detecting the linear effects of economic development on corruption but evaluate any existence of a non-linear relationship after controlling for social, economic and institutional factors for India. The results for South Asian nations indicate that these nations are more corrupt than non-South Asian countries. For India, we find an existence of a non-linear relationship between economic development and corruption. The interactive relationship between economic development and openness of India’s economy leads to a reduction in corruption. The results provide some new inferences in the case of South Asian nations in general and India in particular. The policy implications suggests a combination of economic, institutional and social policies that can effectively, in turn, reduce and lower the effects of corruption on the society, economy and development.