Does Economic Freedom Moderate Perceived Corruption for Firms in India?
Nabamita Dutta (),
Saibal Kar () and
Adam Stivers
Additional contact information
Nabamita Dutta: University of Wisconsin, La Crosse
Adam Stivers: University of Wisconsin, La Crosse
No 16484, IZA Discussion Papers from Institute of Labor Economics (IZA)
Abstract:
Available wisdom suggests that a negative relationship prevails between economic freedom and perceived corruption among firms. However, the relationship is far from linear and a number of complex interactions make it fairly nuanced. We show that greater competition may accentuate the problem of corruption. This is contrary to the general observation that regulations create conditions for corrupt practices. This study uses a broad-based survey for India to examine the role of economic freedom in influencing perceived corruption. The firm-level data helps to explore the relationship between economic freedom across Indian states and the perceived corruption in the formal sector. A statistically significant negative relationship as we obtain implies a fall in perceived corruption as a function of rise in contemporaneous and lagged economic freedom. These results hold when we design matching models and add a number of covariates with potentially opposite impact overall. The empirical structure clearly highlights the process of identification and shows that small and young firms and those with sole ownership perceive greater benefits from higher economic freedom. However as claimed above, older firms perceive higher corruption when economic freedom is higher. This lends support to the idea that competition facilitated by economic freedom can increase rent seeking behavior. Our study contributes to the literature by emphasizing that the relationship between economic freedom and corruption in India is layered, with firm characteristics playing a crucial role.
Keywords: perceived corruption; economic freedom; firm size; ownership; India (search for similar items in EconPapers)
JEL-codes: D73 E26 J54 L11 P37 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2023-09
New Economics Papers: this item is included in nep-bec, nep-dev and nep-ent
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://docs.iza.org/dp16484.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp16484
Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Access Statistics for this paper
More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().