Economic growth in a country can be explained by numerous variables, both positive and negative. Increasing levels of education, investment and openness are examples of factors generally believed to have positive effects on the economic progress, while corruption is one of the factors often regarded as detrimental to economic growth.

The purpose of this thesis is to measure and analyze if the levels of perceived corruption in a cross-section of countries have affected their economic growth rates over the years 2004-2008. The study is carried out with four regressions on a sample of 123 countries and eight variables for the time period in question. The models are constructed on the basis of both the neoclassical growth theory and the endogenous growth theory.

The found result contradicts the expected outcome; it shows that the perceived levels of corruption are significantly and positively correlated with economic growth.

It is however found that countries with widespread corruption, in general developing countries, have experienced high economic growth over these years. A correlation the authors argue can explain the unexpected sign of the corruption variable.