Corruption and the Institutional Environment for Growth
AbstractSeveral cross-country studies have found that corruption is detrimental to economic growth, but the findings are not universally robust. We utilize the economic freedom index to examine if corruption can facilitate growth by allowing entrepreneurs to avoid inefficient policies and regulations when economic freedom is limited. Using regression analysis, we find that corruption is growth enhancing when economic freedom is most limited but the beneficial impact of corruption decreases as economic freedom increases. Not all areas of economic freedom affect the corruption-growth relationship equally. In particular, we find that when we analyze individual areas of economic freedom the beneficial effect of corruption disappears most quickly when the size of government and the extent of regulation decrease.
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Bibliographic InfoPaper provided by Suffolk University, Department of Economics in its series Working Papers with number 2008-6.
Length: 25 pages
Date of creation: 19 Aug 2008
Date of revision:
Corruption; Economic Freedom; Growth;
Other versions of this item:
- Jac C Heckelman & Benjamin Powell, 2010. "Corruption and the Institutional Environment for Growth," Comparative Economic Studies, Palgrave Macmillan, vol. 52(3), pages 351-378, September.
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- H10 - Public Economics - - Structure and Scope of Government - - - General
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-31 (All new papers)
- NEP-DEV-2008-08-31 (Development)
- NEP-POL-2008-08-31 (Positive Political Economics)
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