Abstract
Given the current economic crisis and increasing competition both for foreign investment and in international markets, we think that this economic analysis is timely and useful as the corruption level is a significant factor in the investment decision-making process. In this article, we investigate whether different types of economic regulation (different types of capitalism) might be fostering corruption. We think that countries with the liberal market economics system might have a lower corruption. We use the theoretical approach of Hall, Soskice (2001) to the varieties of capitalism to analyse countries’ competitiveness according to the competitiveness indices of the World Economic Forum (WEF) and the International Institute for Development Management (IMD). We use the Knell and Srholec (2005) methodology to calculate the index of coordination that determines a country’s type of capitalism. The index consists of 9 variables which are later divided into 3 groups according to the factor analysis results. For the corruption estimate, we use the Transparency International corruption perceptions index. Regression analysis revealed that coordinated market economies (CME) are more conducive for corruption.
Highlights
Control of corruption is of great importance for countries worldwide trying to improve their investment environment and increase productivity through higher investments, not least via foreign direct investments
This article aims to examine the relation between a country’s type of capitalism, which is determined by using the Knell, Srholec (2005) methodology, and the corruption perceptions index measured by Transparency International
The first phase of our analysis was to determine sample size. It depended on the number of countries that were included in the IMD World Competitiveness Ranking, World Bank “Doing Business”, and World Economic Forum competitiveness index calculations
Summary
Control of corruption is of great importance for countries worldwide trying to improve their investment environment and increase productivity through higher investments, not least via foreign direct investments. Competition in foreign markets and competition for foreign direct investment (FDI) encourages weighting economic policy decisions and taking into account the cost of excessive regulation. Knowing the relationship between the level of economic coordination and corruption would allow better assessing the trade-offs and hopefully making better-informed decisions. This article aims to examine the relation between a country’s type of capitalism, which is determined by using the Knell, Srholec (2005) methodology, and the corruption perceptions index measured by Transparency International. If there is a relationship between the indicators we analyze, different types of capitalism might support corruption differently. As a greater regulation is likely to increase the profitability of corruption and create better conditions for corruption, the
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