When is Corruption a Substitute for Economic Freedom?
Brock School of Business, Samford University
Lisa L. Verdon
College of Wooster
March 29, 2010
Law and Development Review, Forthcoming
Corruption supposedly reduces economic development by creating an uncertain contracting environment and by preventing the state from efficiently providing public goods and correcting externalities. However, corruption can be efficiency-enhancing in countries with relatively little economic freedom. Corruption in the military appears to reduce economic growth, while corruption in the educational environment appears to increase economic growth. On net, evidence suggests that corruption is growth-increasing when economic freedom is low.
Number of Pages in PDF File: 35
Keywords: Corruption, Economic Freedom, Economic Growth
JEL Classification: D73, O10, O43
Date posted: May 13, 2008 ; Last revised: April 4, 2010
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