Effect of Corruption on Human Development Across the Globe: Does Government Budget Transparency Play a Role?

Abstract

This study investigates the non-linear relationship between corruption and human development and examines how government budget transparency moderates this nexus across 119 economies spanning a period from 2010 to 2021. Using Prais–Winsten and Hansen’s (2000) panel threshold regression techniques, the analysis reveals that corruption negatively affects human development, with the adverse impact intensifying at higher levels of corruption—supporting the “sand the wheels” hypothesis. Furthermore, strong budget transparency mitigates this negative effect, indicating that transparency, public participation, and oversight enhance development outcomes even in high-corruption contexts. The study contributes to the literature by uncovering the threshold effects of corruption and demonstrating the moderating role of fiscal transparency in promoting human development. The study advances the “sand the wheels” theory of corruption by demonstrating that its adverse effects on human development are non-linear, that is, the marginal harm increases as corruption intensifies.