Economic growth and corruption in emerging markets: Does economic freedom matter?

This study analyzes the effects of corruption on economic growth for different levels of economic freedom. The effects of corruption on the economy, which can increase or decrease growth, were tested in emerging countries in Latin America and Pacific Asia, between 2000 and 2017, through one-step System-GMM estimation panel data regressions. The results showed that economic freedom works as a moderator in the relationship between corruption and economic growth. On both continents, greater economic freedom, on average, supports the growth of GDP per capita. In Latin America, it was possible to corroborate the hypothesis that corruption damages countries with greater economic freedom but favors economic growth in countries with lower economic freedom levels. Regarding the Asian countries studied, there was only a negative effect of corruption on economic growth in countries with less economic freedom. When comparing this reality with the one in Latin America, it was observed that in terms of development, the countries in this continent are in earlier stages compared to the Asian countries, even though both country groups are called “emerging.”