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Corruption and the Institutional Environment for Growth

  • Heckelman, Jac C.

    ()

    (Wake Forest University)

  • Powell, Benjamin

    ()

    (Suffolk University, Department of Economics)

Several cross-country studies have found that corruption is detrimental to economic growth, but the findings are not universally robust. We utilize the economic freedom index to examine if corruption can facilitate growth by allowing entrepreneurs to avoid inefficient policies and regulations when economic freedom is limited. Using regression analysis, we find that corruption is growth enhancing when economic freedom is most limited but the beneficial impact of corruption decreases as economic freedom increases. Not all areas of economic freedom affect the corruption-growth relationship equally. In particular, we find that when we analyze individual areas of economic freedom the beneficial effect of corruption disappears most quickly when the size of government and the extent of regulation decrease.

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File URL: http://192.138.214.118/RePEc/docs/wpaper/2008-6.pdf
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Paper provided by Suffolk University, Department of Economics in its series Working Papers with number 2008-6.

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Length: 25 pages
Date of creation: 19 Aug 2008
Date of revision:
Handle: RePEc:suf:wpaper:2008-6
Contact details of provider: Web page: http://www.suffolk.edu/college/2175.html
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  19. 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, 06.
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  24. Heckelman, Jac C & Stroup, Michael D, 2000. "Which Economic Freedoms Contribute to Growth?," Kyklos, Wiley Blackwell, vol. 53(4), pages 527-44.
  25. Mo, Pak Hung, 2001. "Corruption and Economic Growth," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 66-79, March.
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  28. Enrico Colombatto, 2003. "Why is Corruption Tolerated?," The Review of Austrian Economics, Springer, vol. 16(4), pages 363-379, December.
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