Liberal reform, political corruption, and socio-economic impacts in Asia and Eastern Europe

Abstract

How does economic liberalization — or a country’s integration into the global economy — affect its economic performance and the distribution of wealth? There have been heated debates on positive and negative sides of globalization. This article seeks to fill the existing gap in the study of globalization and its socio-economic outcomes by focusing on the mediating effect of political corruption in countries from Asia and Eastern Europe. The authors suggest that, in countries with high levels of corruption, extensive economic liberalization brings faster economic growth. However, the economic growth does not improve the corrupt countries’ distributive justice, increasing poverty and leaving the level of inequality intact after the economic development. On the other hand, economic liberalization in less corrupt countries neither generates fast economic growth, nor significantly improves the countries’ poverty and inequality. The empirical result implies that neoliberal economic reform per se does not have direct impact on a country’s distributive justice. This article studies 40 developing countries from Asia and Eastern Europe.