When is Corruption a Substitute for Economic Freedom?
Law and Development Review, Forthcoming
35 Pages Posted: 13 May 2008 Last revised: 4 Apr 2010
Date Written: March 29, 2010
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.
Keywords: Corruption, Economic Freedom, Economic Growth
JEL Classification: D73, O10, O43
Suggested Citation: Suggested Citation