The Impact of Corruption, Economic Freedom and Urbanization on Economic Development: Western Balkans versus EU-27

Nerajda Feruni,Alina Brezoi,Mirela Panait,Irina Gabriela Rădulescu,Eglantina Hysa

doi:10.3390/su12229743

Nerajda Feruni, Alina Brezoi + Show 3 more

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https://doi.org/10.3390/su12229743

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Abstract

The topic of economic development has been addressed in recent decades from more and more points of view in order to identify the factors with significant impact on this phenomenon. Identifying the factors and measuring their impact on economic development are essential starting points for adopting the necessary public policies. Similar types of research for the Western Balkan countries and comparative analyses between the Western Balkans and the European Union countries are limited in number. Hence, the main purpose of this paper is to empirically test the impact of corruption, economic freedom, and urbanization on the economic development for both the Western Balkan countries and the EU countries for the period 2009–2018 to provide a comparative analysis for these two groups. The corruption perception index, economic freedom index, and urban population growth are chosen as independent variables, whereas the dependent variable of the human development index (HDI) represents economic development. Using the Random Effects model, which falls under the Panel Generalized Least Square method, the empirical analysis suggests that corruption has a negative impact on economic development, while economic freedom and urbanization have a positive impact on the economic development for both groups of countries. However, the impact of corruption is more destructive in the Western Balkans, and they appear to benefit more from economic freedom and urbanization as compared to the EU countries. Whether the impact of the chosen independent variables is restricted to any component of the HDI in particular is left open for further studies in the future, though the results of this paper are highly significant and in accordance with the reviewed literature.

Highlights

Development and growth represent the binomial that goes side by side in the process of a country’s advancement
The main objective of this paper is to empirically test the relationship between economic development, corruption, economic freedom, and urbanization for both the Western Balkan countries and the EU countries to provide a comparative analysis for these two groups
The numbers indicate that the Western Balkans belong on the tier of the countries, which have a high human development, while the EU-27 belong on the tier of the countries that have very high human development

Summary

Introduction

Development and growth represent the binomial that goes side by side in the process of a country’s advancement. Economic growth is considered a single-dimensional phenomenon, as it focuses only on the income of the people of the country. Economic development is considered a multidimensional phenomenon because it focuses on the income of the people and the improvement of the living standards of the country’s people. Due to the nature of this multi-dimensional phenomenon, the economic development as measured by the human development index (HDI) can be considered a better index compared to the economic growth, and the cornerstone of the economic growth of a particular country [3,4,5,6]. The third dimension, which stands for having a decent standard of living, is measured by gross national inco2m.1.eHpumerancDapevietloapmadenjtuInsdteexd for the price level of the country. If a country has a score of 0.8–1.0, it is considered as a country with very high human development

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