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The Efficient Corruption Hypothesis and the Dynamics between Economic Freedom, Corruption, and National Income

Joshua Hall and John Levendis
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John Levendis: Loyola University New Orleans, Department of Economics

No 17-06, Working Papers from Department of Economics, West Virginia University

Abstract: Income, economic freedom, and corruption interact in complex ways as all three variables are arguably endogenous. We explicitly model this endogeneity using a panel VAR framework. The pVAR models we estimate are able to explicitly model this endogeneity better than the single-equation panel data models previously used in the literature. Using data on corruption and income from the World Bank and economic freedom from the Fraser Institute, we provide evidence that corruption and the absence of economic freedom have a negative effect on national income.

Keywords: corruption; regulation; institutions; economic freedom (search for similar items in EconPapers)
JEL-codes: D73 (search for similar items in EconPapers)
Date: 2017-04
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