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Corruption and business confidence: a panel data analysis

Gabriel Montes and André Almeida ()
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André Almeida: Fluminense Federal University and IBGE

Economics Bulletin, 2017, vol. 37, issue 4, 2692-2702

Abstract: Decisions taken by entrepreneurs and investors are guided, to some extent, by expectations and feelings about the economy and their business. In turn, once corruption impacts the economy, and therefore affects the business environment; and since the economic environment affects business confidence, and therefore entrepreneurs' decisions, an important issue to be verified is whether corruption is capable of undermining business confidence. Although there exists evidence that corruption is harmful to the economy, there are no empirical studies regarding the effect of corruption on business confidence. Thus, this study analyzes the effect of corruption on business confidence. The effect of corruption on business confidence is estimated using panel data methodology for a sample of 40 countries (28 developed and 12 developing) covering the period between 1990 and 2013 and the period between 1995 and 2013 (annual data). The estimates are made for the total sample and then for the sample of developed countries. The results suggest corruption negatively impacts business confidence.

Keywords: corruption; business confidence; developed countries; panel data (search for similar items in EconPapers)
JEL-codes: M2 D7 (search for similar items in EconPapers)
Date: 2017-12-01
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