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Economic Freedom and Corruption: New Cross-Country Panel Data Evidence

Steven Yamarik and Chelsea Redmon, 2017. "Economic Freedom and Corruption: New Cross-Country Panel Data Evidence," Journal of Private Enterprise, vol. 32(Summer 20), pages 17-44.

Posted: 26 Aug 2018

See all articles by Steven Yamarik

Steven Yamarik

California State University, Long Beach - Department of Economics; Henan University

Date Written: August 2018

Abstract

This paper examines the empirical relationship between economic freedom and corruption. We use a principal-agent-client model to identify the potential causal linkages between corruption and the components of economic freedom. We then estimate a two-equation system where freedom depends upon corruption and vice versa. Using a series of panel GMM estimators, we find that corruption lowers economic freedom, but that freedom does not significantly impact corruption. The result that corruption lowers freedom supports the “grabbing handing” theory of corruption where a non-benevolent government creates inefficient regulation and barriers of entry to create economic rents.

Keywords: Economic Freedom, Corruption, Panel Data, GMM

JEL Classification: D73, K40, O17, P50

Suggested Citation

Yamarik, Steven, Economic Freedom and Corruption: New Cross-Country Panel Data Evidence (August 2018). Steven Yamarik and Chelsea Redmon, 2017. "Economic Freedom and Corruption: New Cross-Country Panel Data Evidence," Journal of Private Enterprise, vol. 32(Summer 20), pages 17-44., Available at SSRN: https://ssrn.com/abstract=3232261

Steven Yamarik (Contact Author)

California State University, Long Beach - Department of Economics ( email )

1250 Bellflower Blvd
Long Beach, CA 90840-4607
United States

HOME PAGE: http://www.csulb.edu/~syamarik

Henan University ( email )

85 Minglun St. Shunhe
Kaifeng, Henan 475001
China

HOME PAGE: http://cfds.henuecon.education/index.php/research/data/yes-capital-data

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