Document Type



When looking at the different effects of institutional quality on economic development, namely control of corruption, there are two different hypotheses that explain such effects. One is the “grease the wheel” hypothesis, which predicts that corruption is beneficial for growth, and the other one is the “sand the wheel” hypothesis, which says the opposite. Corruption is normally blamed for the slow economic growths in some countries, but some Asian countries’ exponential growths have proven the “grease the wheel” hypothesis otherwise. The “Asian experience”1 phenomenon occurs when corruption does not seem to hamper business activities in some Asian countries. This research will focus on finding how institutional quality variables, such as corruption control and government effectiveness, can correlate with innovation variables to contribute to economic growth. Using data and examples from Asian countries, this study finds a positive correlation between corruption and economic growth in some developed countries, such as China and South Korea.