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Investigating the Interaction Effect of Democracy and Economic Freedom on Corruption: A Cross-Country Quantile Regression Analysis

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Author Info

  • Shrabani Saha

    ()
    (School of Accounting Finance and Economics, Edith Cowan University, 270 Joondalup Drive, Joondalup, WA-6027, Australia)

  • Jen-Je Su

    ()
    (Department of Accounting, Finance and Economics, Griffith University, Nathan QLD 4111, Australia)

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    Abstract

    This paper explores the interaction effects of economic freedom and democracy in controlling corruption for 100 countries by using quantile regression technique. The main contribution is to explore the interaction effects throughout conditional distribution of corruption across nations. Our results reinforce some findings in the literature, but also provide new conclusions. The findings suggest a stronger and significant interaction effect in reducing corruption, especially in the most-corrupt countries. However, democratic and economic freedoms alone may not cure corruption effectively in the most-corrupt nations, a sound democratic reform can eliminate corruption substantially only after achieving a threshold level of economic freedom.

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    File URL: http://www.eap-journal.com/archive/v42_i3_07-S.Saha_and_J.Su.pdf
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    Bibliographic Info

    Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

    Volume (Year): 42 (2012)
    Issue (Month): 3 (December)
    Pages: 389-396

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    Handle: RePEc:eap:articl:v:42:y:2012:i:3:p:389-396

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    Web page: http://www.journals.elsevier.com/economic-analysis-and-policy/
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    Related research

    Keywords: Corruption; Democracy; Economic freedom; Quantile regression;

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    References

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    1. Michael T. Rock, 2007. "Corruption and Democracy," Working Papers 55, United Nations, Department of Economics and Social Affairs.
    2. Mohtadi, Hamid & Roe, Terry L., 2001. "Democracy, Rent Seeking, Public Spending And Growth," Bulletins 12981, University of Minnesota, Economic Development Center.
    3. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
    4. Goel, Rajeev K. & Nelson, Michael A., 2007. "Are corrupt acts contagious?: Evidence from the United States," Journal of Policy Modeling, Elsevier, vol. 29(6), pages 839-850.
    5. Saha, Shrabani & Gounder, Rukmani & Su, Jen-Je, 2009. "The interaction effect of economic freedom and democracy on corruption: A panel cross-country analysis," Economics Letters, Elsevier, vol. 105(2), pages 173-176, November.
    6. Okada, Keisuke & Samreth, Sovannroeun, 2011. "The effect of foreign aid on corruption: A quantile regression approach," MPRA Paper 27969, University Library of Munich, Germany.
    7. Billger, Sherrilyn M. & Goel, Rajeev K., 2009. "Do existing corruption levels matter in controlling corruption?: Cross-country quantile regression estimates," Journal of Development Economics, Elsevier, vol. 90(2), pages 299-305, November.
    8. Graeff, P. & Mehlkop, G., 2003. "The impact of economic freedom on corruption: different patterns for rich and poor countries," European Journal of Political Economy, Elsevier, vol. 19(3), pages 605-620, September.
    9. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
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