International E-publication: Publish Projects, Dissertation, Theses, Books, Souvenir, Conference Proceeding with ISBN.  International E-Bulletin: Information/News regarding: Academics and Research

Economic Growth, Economic Freedom, and Corruption: Evidence from Panel Data

Author Affiliations

  • 1 Department of Economics, Asian University for Women, 20/A, M M Ali Road, Chittagong 4000, BANGLADESH

Int. Res. J. Social Sci., Volume 4, Issue (5), Pages 37-42, May,14 (2015)

Abstract

Economic Freedom is considered to be conducive to growth while corruption is mostly found to be anti-growth. A related question could be whether Economic Freedom reduces the possible adverse effect of corruption on economic growth. Moreover, how are corruption and growth possibly affected by the major components of Economic Freedom? For example, a major element of economic freedom is Size of the Government which consists of taxes, among others. Income tax is considered as a levy on agent’s incentive to productive activity by reducing an agent’s property right. However, if revenue collected from taxes is used by the government in productive sectors then the adverse effect of taxes might decrease. On the other hand, negative effect of taxes on growth might be accentuated by higher degree of corruption. This paper examines the effects of corruption, economic freedom and its major components and their possible cross effects with corruption on economic growth. By using cross-country data and a panel estimation procedure it turned out that economic freedom was generally positively associated while corruption was negatively associated with growth though the result for the later is not robust. The influence on corruption seemed to decline in the presence of high degree of Economic Freedom. However, the findings were not as robust when components of Economic Freedom were considered separately.

References

  1. Solow R.M., A Contribution to the Theory of Economic Growth, The Quarterly Journal of Economics, 70(1), 65-94, (1956)
  2. Barro R.J., Government spending in a simple model of endogenous growth, Journal of Political Economy, 98(5), The Problem of Development: A Conference of the Institute for the Study of Free Enterprise Systems, S103-S125, (1990)
  3. Barro R.J., Economic Growth in a Cross Section of Countries, Quarterly Journal of Economics, 106(2), 407-443, (1991)
  4. Vanssay X. and Spindler Z.A., Freedom and Growth: Do Constitution Matters?, Public Choice, 78, 359-72, (1994)
  5. Wright L.M., A Comparative Survey of Economic Freedoms, In: R.D. Gastil (ed.), Freedom in the World: Political Rights and Civil Liberties 1982, London: Greenwood Press, (1982)
  6. Ram R., Private Investment, Freedom, Openness, and Economic Growth: Evidence from Recent Cross-Country Data, Economia Internazionale, 53(3), 371-388, (2000)
  7. Gwartney J.D., Lawson R. and Hall J., Economic Freedom of the World: 2014 Annual Report. Vancouver: The Fraser Institute, (2014)
  8. Knack S. and Keefer P., Institutions and economic performance: cross country tests using alternative institutional measures, Economics and Politics, 7(3), 207-227, (1995)
  9. Ayal E.B. and Karras, G., Components of Economic Freedom and Growth: An Empirical Study, The Journal of Developing Areas, 32 (3), 327-338, (1998)
  10. Nelson M.A. and Singh, R.D., Democracy, Economic Freedom, Fiscal Policy and Growth in LDCs: A Fresh Look, Economic Development and Cultural Change, 46, 677-696, (1998)
  11. Levine R. and Renelt M., A sensitivity analysis of cross-country growth regression, American Economic Review, 82, 942-963, (1992)
  12. Hall and Jones, Why Do Some Countries Produce So Much More Output per Worker than Others??, Quarterly Journal of Economics, 114(1), 83-116, (1999)
  13. Sala-i-Martin, I just Ran Four Million Regressions, NBER Working Paper No. 6252, National Bureau of Economic Research, Cambridge, MA, (1997)
  14. Clark A.K. and Clark M., Mind the Gap: Public Attitudes on Crime Miss the Mark, International Research Journal of Social Sciences, 2(3), 1-11, (2013)
  15. Ahmed C.J., Legal Aid and Women’s Access to Justice in Bangladesh: A Drizzling in the Desert, International Research Journal of Social Sciences, 1(3), 8-14, (2012)
  16. Ochoa J.A. and Banderas J.A., Welfare and Crime in Mexico, International Research Journal of Social Sciences, 2(11), 6-10, (2013)
  17. Shahabuddin S. and Ahsan L., The Economic Policies for Elimination of Poverty, A Comparative Analysis between Pakistan and Malaysia, International Research Journal of Social Sciences,3(9), 63-67, (2014)
  18. Afzal A. and Mirza N., The Impact of Financial Liberalization on the Credit System of Pakistan: Historical Perspective, International Research Journal of Social Sciences,2(3), 74-80, (2013)
  19. Aidt T.S., Economic Analysis of Corruption: A Survey, The Economic Journal, 113, F632-F652, (2003)
  20. Bardhan P., Corruption and Development: A Review of Issues, Journal of Economic Literature, 35, 1320-1346, (1977)
  21. Bruno V., Corruption in a model of Growth: Political reputation, competition and shocks, OFCE, Fondation National des Sciences Politiques, 69 Quai d’Orsey, F-75007, Paris, (2000)
  22. Mauro P., Corruption and Growth, The Quarterly Journal of Economics, 110(3), 681-712, (1995)
  23. Méon P. and Sekkat K., Does Corruption Grease or Sand the Wheels of Growth?, Public Choice, 122, 69–97, (2005)
  24. Brunetti A., Political Variables in Cross-Country Growth Analysis, Journal of Economic Surveys, 11(2), 163-190, (1991)
  25. Barreto R.A., Endogenous Corruption, Inequality and Growth: Econometric Evidence, School of Economics, Adelaide University, Working Paper No. 01-2, Adelaide, (2001)
  26. Houston D., Can Corruption Ever Improve an Economy?, Cato Journal, 27 (3), 325–42, (2007)
  27. IFS, International Monetary Fund CD –ROM, (2013)