Human capital and corruption

It is commonplace to assume that corruption is bad, although the evidence is far from clear about this. Empirical investigations are typically at the macro level and have very little to say about the micro channels of corruption. In fact there is very little structural modelling or estimation in this area.

Spyridon Boikos concentrates on the impact of corruption on the accumulation of human capital using an endogenous growth model. Two channels are investigated: the first is about public resources being misdirected being education and production sectors, and the second is complementarity between human and physical capitals. Putting this to the data, it is found that corruption does not have that much impact in the education sector, and it is conjectured that corruption does not have the same bite in the education sector as in the rest of the economy. I cannot help thinking that the model misses the big elephant in the room in terms of human capital and corruption: a very common form of corruption in this regard is bribing for entry into schools, passing exams and even getting diplomas. This means that the signalling effect of diplomas is getting lost, and hence the incentive to get an education vanishes, in particular for the talented ones. And for those who attend a school, there is little incentive to learn.