Does Economic Freedom Determine the Control of Corruption?

Abstract

    The article aims to examine whether or not the economic freedom (EFI) matters for the control of corruption (COR). The relationship between variables of interest is explored in three panels. The first overall panel contains 113 countries; the second contains 36 developed countries, while the third panel contains 77 developing countries in the time span ranging from 2002 to 2016. The findings of linear dynamic panel data estimators confirm the positive impact that is found to be higher in terms of developed countries. Granger causality test indicates a bidirectional relationship between EFI and COR in overall sample as well as in the case of both, developed and developing countries. ARDL framework reports a significant positive relationship between variables of interest in both, short- and the long-term. Therefore, the overall conclusion indicates that policy makers need to enable and create legal and institutional basis for securing economic freedom in order to improve the control of corruption

Keywords

• ARDL approach,Causality,control of corruption,economic freedom

Does Economic Freedom Determine the Control of Corruption?

Abstract

    The article aims to examine whether or not the economic freedom (EFI) matters for the control of corruption (COR). The relationship between variables of interest is explored in three panels. The first overall panel contains 113 countries; the second contains 36 developed countries, while the third panel contains 77 developing countries in the time span ranging from 2002 to 2016. The findings of linear dynamic panel data estimators confirm the positive impact that is found to be higher in terms of developed countries. Granger causality test indicates a bidirectional relationship between EFI and COR in overall sample as well as in the case of both, developed and developing countries. ARDL framework reports a significant positive relationship between variables of interest in both, short- and the long-term. Therefore, the overall conclusion indicates that policy makers need to enable and create legal and institutional basis for securing economic freedom in order to improve the control of corruption

Keywords

• ARDL approach,Causality,Control of corruption,Economic freedom

References

1. Acemoglu, D. and Verdier, T. (1998). Property Rights, Corruption and the Allocation of Talent: A General Equilibrium Approach. The Economic Journal, 108, 1381-1403.
2. Aidt, S. T. (2009). Corruption, Institutions and Economic Development.Oxford Review of Economic Policy, 25(2), 271-291.
3. Apergis, N., Dincer,O.C. and Payne, J.E. (2012). Live Free or Bribe: On The Causal Dynamics Between Economic Freedom and Corruption in U.S. States. European Journal of Political Economy, 28, 215-226.
4. Attaoui, I.,Ammpurim B. and Gargouri, I. (2017).Causality Links among Renewable Energy Consumption, CO2 Emissions, and Economic Growth in Africa: Evidence from a Panel ARDL-PMG Approach.Environmental Science and Pollution Research, 24(14), 13036-13048.
5. Chafuen, A., Guzman, E. (2000). Economic Freedom and Corruption. In: O'Driscoll, G.P., Holmes, K.R., Kirkpatrick, M. (Eds.), Index of Economic Freedom. The Heritage Foundation, Washington D.C., 51-63. Retrieved from https://mpra.ub.uni-muenchen.de/18731/
6. Dawson, J.W. (2003). Causality in the Freedom-Growth Relationship.European Journal of Political Economy, 19, 479-495.
7. Graeff, P. and Mehlkop, G. (2003). The Impact of Economic Freedom on Corruption: Different Patterns for Rich and Poor Countries. European Journal of Political Economy, 19, 605-620.
8. Heckelman, J.C. (2000). Economic Freedom and Economic Growth: A Short-Run Causal Investigation, Journal of Applied Economics, 3(1),71-91.

9. Karabegovic, A., Samida, D., Schelegel, C.M. and McMahon, F. (2003). North American Economic Freedom: An Index of 10 Canadian Provinces and 50 US States. European Journal of Political Economy, 19(3), 431-452.
10. Lopez, L. and Weber, S. (2017). Testing for Granger Causality in Panel Data.Retrieved from https://www.unine.ch/files/live/sites/irene/files/shared/documents/Publications/Working%20papers/2017/WP17-03_V2.pdf
11. Mironov, M. (2005).Bad Corruption, Good Corruption and Growth, University of Chicago. Retrieved from https://www.researchgate.net/publication/228374181_Bad_Corruption_Good_Corruption_and_Growth
12. Ozcan, C.C., Aslan, M. and Nazlioglu, S. (2017). Economic Freedom, Economic Growth and International Tourism for Post-Communist (Transition) Countries: A Panel Causality Analysis. Theoretical and Applied Economics, 24(2),75-98.
13. Paldam, M. (2002). The Big Pattern of Corruption: Economics, Culture and the Seesaw Dynamics. European Journal of Political Economy, 18(2), 215-240.
14. Pandit, R. and Laband, D.N. (2009). Economic Freedom, Corruption, and Species Imperilment: A Cross-Country Analysis, Society and Natural Resources, 22(9), 805-823.
15. Pesaran, M.H., Shin Y., Smith R.P. (1999).Pooled Mean Group Estimation of Dynamic Heterogeneous Panels.J Am Stat Assoc, 94(446), 621-634.
16. Pieroni, L. and d’Agostino, G. (2013).Corruption and the Effects of Economic Freedom, European Journal of Political Economy, 29, 54-72.
17. Saha, S., Gounder, R., Su, J.-J. (2009). TheInteraction Effect of Economic Freedom and Democracy on Corruption: A Panel Cross-Country Analysis. Economics Letters, 105(2), 173-176.
18. Satrovic, E. (2017). Financial Development and Human Capital in Turkey: ARDL Approach, Cappadocia Academic Review, 1(2), 1-15.
19. Satrovic, E. (2018a). Merits of Life Insurance, Munich: GRIN Verlag.
20. Satrovic, E. (2018b). The Human Development Relies on Renewable Energy: Evidence from Turkey, 3rd International Energy & Engineering, Book of Proceedings, Gaziantep, Turkey, 19-27.
21. Satrovic, E. (2018c).Economic Output and High-Technology Export: Panel Causality Analysis. International Journal of Economic Studies, 4(3), 55-63.
22. Satrovic, E. and Sehic, E. (2015). Composite Index for Quality of Life in Municipalities in Federation of Bosnia and Herzegovina, CEEOL (Central and Eastern European Online Library) EBSCO, ISBN 978-9926-410-07-0, CLXIV(6), 275-289.
23. Satrovic, E. and Muslija, A. (2018).Causality Relationship between Foreign Direct Investment and Tourism.International Journal of Economics and Administrative Studies, 22, 65-76.
24. Somun-Kapetanovic, R., Resic, E. and Satrovic, E. (2016). Panel Analysis of Relationship between Financial Development and Economic Growth, 8th International Conference of School of Economics and Business Sarajevo, Conference Proceedings, 247-262.
25. Yamarik, S., Redmon, Ch. (2017). Economic Freedom and Corruption: New Cross-Country Panel Data Evidence. The Journal of Private Enterprise, 32(2), 17-44.