Live free or bribe: On the causal dynamics between economic freedom and corruption in U.S. states

Nicholas Apergis (), Oguzhan Dincer and James Payne

European Journal of Political Economy, 2012, vol. 28, issue 2, 215-226

Abstract: We investigate the relationship between economic freedom and corruption using data from U.S. states covering almost a quarter of a century. Our study advances the existing literature on several fronts. First, instead of using subjective cross-country corruption indices assembled by various investment risk services, we use a more objective measure of corruption: the number of government officials convicted in a state for crimes related to corruption. Second, unlike previous studies, we exploit both time series and cross-sectional variation in the data in the estimation of a panel error correction model. The panel error correction model results show that in the long-run economic freedom, per capita income, and education have a negative and statistically significant impact on corruption whereas income inequality has a positive and statistically significant impact. The causality tests associated with the panel error correction model reveal bidirectional causality between economic freedom and corruption in both the short-run and long-run.

Keywords: Economic freedom; Corruption; Panel error correction model (search for similar items in EconPapers)
JEL-codes: H1 H3 K4 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (28)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:28:y:2012:i:2:p:215-226

DOI: 10.1016/j.ejpoleco.2011.10.001

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