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Corruption and the Effects of Economic Freedom

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  • Pieroni, Luca
  • d'Agostino, Giorgio

Abstract

The predictions that economic freedom is beneficial in reducing corruption have not been found to be universally robust in empirical studies. The present work reviews this relationship by using firms' data in a cross-country survey and argues that approaches using aggregated macro data have not been able to explain it appropriately. We model cross-country variations of the microfounded economic freedom-corruption relationship using multilevel models. Additionally, we analyze this relationship by disentangling the determinants for several components of economic freedom because not all areas affect corruption equally. The results show that the extent of the macro-effects on the measures of (micro)economic freedom for corruption, identified by the degree of economic development of a country, can explain why a lack of competition policies and government regulations may yield more corruption. Estimations for Africa and transition economy subsamples confirm our conjectures.

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  • Pieroni, Luca & d'Agostino, Giorgio, 2009. "Corruption and the Effects of Economic Freedom," MPRA Paper 18731, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:18731
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    Cited by:

    1. d'Agostino, Giorgio & Scarlato, Margherita, 2012. "Inclusive Institutions, Innovation and Economic Growth: Estimates for European Countries," MPRA Paper 43098, University Library of Munich, Germany.
    2. Petra Koudelkova & Wadim Strielkowski & Denisa Hejlova, 2015. "Corruption and System Change in the Czech Republic: Firm-level Evidence," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 1, pages 25-46, March.
    3. Kodila Tedika, Oasis, 2012. "Empirical Survey on the Causes of the Corruption
      [Aperçu empirique sur les causes de la corruption]
      ," MPRA Paper 41484, University Library of Munich, Germany.
    4. Joshua Hall & John Levendis, 2017. "The Efficient Corruption Hypothesis and the Dynamics between Economic Freedom, Corruption, and National Income," Working Papers 17-06, Department of Economics, West Virginia University.
    5. Jamie Bologna & Amanda Ross, 2015. "Corruption and Entrepreneurship: Evidence from a Random Audit Program," Working Papers 15-05, Department of Economics, West Virginia University.
    6. repec:eee:jpolmo:v:39:y:2017:i:5:p:790-808 is not listed on IDEAS
    7. Vetter, Stefan, 2013. "Delegating decision rights for anticipated rewards as an alternative to corruption: An experiment," European Journal of Political Economy, Elsevier, vol. 31(C), pages 188-204.
    8. Fidrmuc, Jarko & Scharler, Johann, 2014. "What Determines Borrowing Costs at the Firm-Level: Firm-Specific and Aggregate Information," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100322, Verein für Socialpolitik / German Economic Association.
    9. Diaby, Aboubacar & Sylwester, Kevin, 2014. "Bureaucratic competition and public corruption: Evidence from transition countries," European Journal of Political Economy, Elsevier, vol. 35(C), pages 75-87.
    10. d'Agostino, G. & Dunne, J.P. & Pieroni, L., 2016. "Corruption and growth in Africa," European Journal of Political Economy, Elsevier, vol. 43(C), pages 71-88.
    11. Georgarakos, Dimitris & Fürth, Sven, 2015. "Household repayment behavior: The role of social capital and institutional, political, and religious beliefs," European Journal of Political Economy, Elsevier, vol. 37(C), pages 249-265.

    More about this item

    Keywords

    Corruption; Economic freedom; Multilevel models;

    JEL classification:

    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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