Towards A Doughnut Economy; An Institutional Failure Perspective

Social services frequently suffer from market failures, prompting justified government intervention. However, such intervention often creates fertile ground for corruption and undermines progress toward the Sustainable Development Goals (SDGs). This paper empirically examines how institutional failure, affects public service provision by analyzing its impact on SDG 3 (Good Health and Well-being) and SDG 4 (Quality Education). Using panel data for 44 countries, 22 classified as relatively corrupt and 22 as relatively clean, over the period 2000 to 2017, we apply Pooled OLS and Fixed Effects models to explore these dynamics. The findings reveal that corruption significantly worsens health outcomes, with a robust impact on infant mortality rates, while its effect on education outcomes, measured via school enrollment rates, is largely insignificant. Notably, a one-point increase in the Corruption Perceptions Index (CPI) is associated with a 0.116% rise in health expenditure across both country groups. However, fixed effects results suggest that the influence of corruption on health and education spending is largely country specific. Surprisingly, our analysis indicates that, within our sample, corrupt countries achieve relatively more efficient healthcare spending. While we offer some explanations for this counterintuitive finding, they should be further studied. Ultimately, the findings indicate that corruption remains a critical barrier to development, and that effective anti-corruption measures could substantially accelerate progress toward achieving the SDGs. JEL D73, I15, I25, C23, O15