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Corruption and destructive entrepreneurship

Author

Listed:
  • Christopher J. Boudreaux

    (Florida Atlantic University)

  • Boris N. Nikolaev

    (Baylor University)

  • Randall G. Holcombe

    (Florida State University)

Abstract

The negative effects of corruption at the macro level are well-documented. Corruption reduces economic growth, lowers investment, and erodes trust in government officials, creating an institutional environment that pushes entrepreneurs from productive to destructive activities. Corruption also has effects at the micro level because some industries are better situated to profit from corruption than others. Corruption not only lowers economic output but also shifts resources toward some industries and away from others. Using federal convictions in the USA as a measure of corruption, regression results show that increased corruption shifts resources toward the construction industry and away from the education industry and professional, scientific, and technical service industry. The evidence also shows that the distance from state capitals and voter turnout moderate the relationship between corruption and firm concentrations.

Suggested Citation

  • Christopher J. Boudreaux & Boris N. Nikolaev & Randall G. Holcombe, 2018. "Corruption and destructive entrepreneurship," Small Business Economics, Springer, vol. 51(1), pages 181-202, June.
    • Handle: RePEc:kap:sbusec:v:51:y:2018:i:1:d:10.1007_s11187-017-9927-x
    DOI: 10.1007/s11187-017-9927-x
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    More about this item

    Keywords

    Corruption; Entrepreneurship; Firm concentration; Political distance;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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