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Licensed Unlicensed Requires Authentication Published by De Gruyter May 10, 2010

When Is Corruption a Substitute for Economic Freedom?

Art Carden and Lisa Verdon

Corruption supposedly reduces economic progress by creating an uncertain contracting environment and by preventing the state from efficiently providing public goods and correcting externalities. However, corruption can be efficiency-enhancing in countries with relatively little economic freedom. Corruption in the military appears to reduce economic growth, while corruption in the educational environment can increase economic growth. Evidence suggests that some types of corruption can increase growth when economic freedom is low.

Published Online: 2010-5-10

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