Corruption and the Institutional Environment for Growth

Jac C. Heckelman () and Benjamin Powell ()
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Jac C. Heckelman: Wake Forest University
Benjamin Powell: Suffolk University, Department of Economics

No 2008-6, Working Papers from Suffolk University, Department of Economics

Abstract: 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.

Keywords: Corruption; Economic Freedom; Growth (search for similar items in EconPapers)
JEL-codes: D73 H10 O43 O57 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-pol
Date: 2008-08-19
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