Abstract
Theoretical models and empirical evidence show that corruption control and economic openness have effects on economic growth. This paper aims to estimate the long-term effects of the anti-corruption effort and economic freedom on economic growth in a sample of 121 countries. We use autoregressive distributed lag (ARDL) models and estimation techniques appropriate to the case where there is a correlation between cross-section errors possibly generated by spillover effects. Besides, estimates of ARDL models are consistent even with endogenous regressors and integrated variables. The results indicate that economic growth of a country can be positively and significantly affected by the long-term corruption control and economic freedom.
Highlights
Corruption, whether public or private, is a worldwide problem
The results indicate that economic growth of a country can be positively and significantly affected by the long-term corruption control and economic freedom
In model (a) the only regressor is the variable degree of economic freedom, in (b) only the corruption control variable, and in (c) both variables are included
Summary
Corruption, whether public or private, is a worldwide problem. This phenomenon diverts part of the available resources for investment, generating both inefficiency and waste in public spending. According to [1], corruption has negative effects on a nation’s wealth and economic growth, discouraging new investments and creating uncertainty over private and social rights. This uncertainty acts as a cost on entrepreneurship, decreasing return on investment and increasing its variation, which discourages investment activities. Similar results are presented in [2] [3] [4] Several studies such as [5] [6] [7] [8] [9] show that corruption can reduce the level of human capital.
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