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Corruption and the effects of economic freedom

  • Luca Pieroni
  • Giorgio D'Agostino

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 relation- ship by using rms' data in a cross-country survey and argues that approaches using aggreg- ated 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 a ect corruption equally. The results show that the extent of the macro-e ects on the measures of (micro)economic freedom for corruption, identi ed by the degree of economic development of a country, can explain why a lack of competition policies and government regulations may yield more cor- ruption. Estimations for Africa and transition economy subsamples con rm our conjectures

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Paper provided by Department of Economics - University Roma Tre in its series Departmental Working Papers of Economics - University 'Roma Tre' with number 0133.

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Date of creation: Sep 2011
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Handle: RePEc:rtr:wpaper:0133
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