Globalization, economic development, and corruption: A cross-lagged contingency perspective

The 2020 health and economic crisis has exacerbated tensions and debates over whether globalization benefits economic development, as countries face both pressures to enhance economic opportunities through globalization and populist movements seeking protection from global forces. We first review perspectives that offer competing evidence about the role of globalization in regard to economic development and corruption. Drawing on resource dependence and institutional theory, we test the two contingencies of the country’s stage of economic development (low, lower-middle, upper-middle, high) and the globalization dimension (economic, social, political) at play to reconcile competing findings. Using a cross-lagged panel design, we show that these contingencies significantly explain when and what type of globalization can benefit a country’s economy and affect corruption. In doing so, the study provides a platform for future research, and identifies important patterns that can better guide policymaking. Among other results, we find low-income countries’ GDP and corruption benefit the most from the formal dimensions of globalization. With increased wealth, countries are more responsive to the legitimacy accrued with the informal dimensions of globalization, which we find comes at the expense of economic efficiency for high-income countries.