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Economic Freedom Versus Political Freedom: Cross‐Country Influences On Corruption

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  • RAJEEV K. GOEL
  • MICHAEL A. NELSON

Abstract

Using a well‐known index of corruption, this paper examines the determinants of corruption for a large sample of countries. Specifically, the present study brings empirical evidence to bear on the question of whether economic freedom or political freedom serves as a deterrent to corrupt activity. In particular, does greater economic freedom or greater political freedom yield a more ‘clean’ society? Our results show that greater economic freedom seems to matter more in this regard. Examining different components of economic freedom, we find that not all these components are equally effective in reducing corruption. For instance, monetary policy seems to have a stronger influence on the level of corrupt activity in a country than fiscal policy. Robustness of these findings is checked and policy implications are discussed.

Suggested Citation

  • Rajeev K. Goel & Michael A. Nelson, 2005. "Economic Freedom Versus Political Freedom: Cross‐Country Influences On Corruption," Australian Economic Papers, Wiley Blackwell, vol. 44(2), pages 121-133, June.
    • Handle: RePEc:bla:ausecp:v:44:y:2005:i:2:p:121-133
    DOI: 10.1111/j.1467-8454.2005.00253.x
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    1. Daniel Kaufmann & Aart Kraay & Massimo Mastruzzi, 2003. "Governance Matters III: Governance Indicators for 1996-2002," Macroeconomics 0308006, University Library of Munich, Germany.
    2. Kimberly Ann Elliott, 1997. "Corruption and the Global Economy," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 12, October.
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