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Effects of Corruption and Economic Freedom on Total Factor Productivity in Middle- and High-Income Countries

Author

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  • Jailson Rodrigues
  • Edson Zambon Monte
  • Ricardo Ramalhete Moreira

Abstract

This study aims to verify the effects of corruption (CPI), economic freedom (EF), and the interaction between these two variables (CPI×EF) on the growth of Total Factor Productivity (TFP) in middle and high-income countries from 1995 to 2019, using a two-step system GMM method for panel data. The results show that reduced perceived corruption and greater economic freedom are positively associated with TFP growth. However, the interaction term has a negative coefficient associated with TFP, suggesting that in countries with high levels of corruption and low economic freedom, which is often found in middle-income countries, implementing anti-corruption policies along with incentives for economic liberalization is a factor of great relevance to achieve higher productivity gains.

Suggested Citation

  • Jailson Rodrigues & Edson Zambon Monte & Ricardo Ramalhete Moreira, 2025. "Effects of Corruption and Economic Freedom on Total Factor Productivity in Middle- and High-Income Countries," Applied Economics and Finance, Redfame publishing, vol. 12(2), pages 51-64, May.
    • Handle: RePEc:rfa:aefjnl:v:12:y:2025:i:2:p:51-64
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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