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Corruption and the Institutional Environment for Growth

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Author Info
Heckelman, Jac C. () (Wake Forest University)
Powell, Benjamin () (Suffolk University, Department of Economics)
Abstract

Several 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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Publisher Info
Paper provided by Suffolk University, Department of Economics in its series Working Papers with number 2008-6.

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Length: 25 pages
Date of creation: 19 Aug 2008
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Handle: RePEc:suf:wpaper:2008-6

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Web page: http://www.suffolk.edu/college/2175.html
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Related research
Keywords: Corruption; Economic Freedom; Growth;

Find related papers by JEL classification:
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

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  18. Heckelman, Jac C & Stroup, Michael D, 2000. "Which Economic Freedoms Contribute to Growth?," Kyklos, Blackwell Publishing, vol. 53(4), pages 527-44.
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