The joint effect of democracy and economic freedom on corruption

Viana, Cristian Johan Picón; Ruiz, José Luis Ramos; Ramírez, Camilo Almanza; Camargo, José Luis Ramos

doi:10.1590/0034-761220190165x

Cristian Johan Picón Viana

Universidad de la Costa / Department of Business Sciences, Barranquilla - Colombia

http://orcid.org/0000-0002-7300-6089

José Luis Ramos Ruiz

Universidad del Norte / Department of Economics, Barranquilla - Colombia

http://orcid.org/0000-0002-8659-6604

Camilo Almanza Ramírez

Universidad del Norte / Department of Economics, Barranquilla - Colombia

http://orcid.org/0000-0003-3934-5578

José Luis Ramos Camargo

Universidad Simón Bolívar / Center of Business Growth & Innovation (Macondolab), Barranquilla - Colombia

http://orcid.org/0000-0002-0460-4480

Cristian Johan Picón Viana - Masters degree in Economics from the Universidad del Norte; PhD student in Social Sciences (Becario Colciencias); Teacher and researcher in the Department of Economic Sciences at the Universidad de la Costa (CUC). E-mail: cpicon@cuc.edu.co

José Luis Ramos Ruiz - Doctor in Economic, Sociology & Agrarian Policy from the Universidad Politécnica de Valencia (Spain); Full professor of the Department of Economics and a researcher with the Economic Analysis Group of the Universidad del Norte (Barranquilla - Colombia). E-mail: jramos@uninorte.edu.co

Camilo Almanza Ramírez - Doctor in Economics from the Friedrich-Alexander University, Erlangen-Nuremberg (Germany); Professor in the Department of Economics and a researcher for the Economic Analysis Group of the Universidad del Norte (Barranquilla - Colombia). E-mail: almanza@uninorte.edu.co

José Luis Ramos Camargo - MSc in Management (Innovation) from Brighton University (England); Professor and researcher in the Business Growth & Innovation Center [Macondolab] of the Universidad Simón Bolívar (Barranquilla-Colombia). E-mail: jose.ramos@unisimonbolivar.edu.co

VARIABLES	DESCRIPTION / SOURCES
Corruption	The Corruption Perceptions Index [CPI], published by Transparency International, average 2010-2016. Multiplied by -1 to indicate that the index increases as the level of corruption increases. Normalized variable with a mean of 0 and a standard deviation of 1.
Corruption	Source: CPI published by Transparency International.
[1]Variable: Economic
1.1. Economic prosperity	Gross Domestic Product per capita, average 2010-2016. Estimated by PPP at 2011 prices. In the case of North Korea, an approximation was used (Maddison, 2001). Normalized variable with a mean of 0 and a standard deviation of 1.
1.1. Economic prosperity	Source: World Bank, Central Intelligence Agency (CIA) and United Nations Development Programme (UNDP).
1.2. Size of the state	Government Expenditure component of the Index of Economic Freedom. Average 2010-2016. Normalized variable with a mean of 0 and a standard deviation of 1.
1.2. Size of the state	Source: Published by The Heritage Foundation and The Wall Street Journal.
[2] Variable: Economic & Political Institutions
2.1. Economic freedom	Index of Economic Freedom. The average of the following indicators is taken into account: “Business Freedom”, “Labor Freedom”, “Monetary Freedom”, “Trade Freedom”, “Investment Freedom” and “Financial Freedom”. Average 2010-2016. Normalized variable with a mean of 0 and a standard deviation of 1.
2.1. Economic freedom	Source: Calculation based on indices published by The Heritage Foundation and The Wall Street Journal (2010-2014).
2.2. Democracy	Average of the political liberty and civil liberty indicators of “The Freedom in the World” index. Average 2010-2016. Multiplied by -1 to indicate that the index increases as the level of democracy increases. Normalized variable with a mean of 0 and a standard deviation of 1.
2.2. Democracy	Source: Published by Freedom House.
[3] Variable: Historical
3.1. British colony	Dichotomous variable; has a value of 1 if the country was a British colony; 0 if it was not.
3.1. British colony	Source: Central Intelligence Agency (The World Factbook). Additional information for this study can be found at: http://www.worldstatesmen.org/COLONIES.html#British
[4] Variable: Cultural
4.1. Protestants	Proportion of people who belong to the Christian Protestant church in each country according to information available in 2014. Normalized variable with a mean of 0 and a standard deviation of 1.
4.1. Protestants	Source: Central Intelligence Agency (The World Factbook) and the Religious Freedom Report, provided by the US State Department.

Variables	MCO	Q10	Q25	Q50	Q75	Q90
First specification
Economic prosperity	-0.434***	-0.464***	-0.567***	-0.500***	-0.398***	-0.318***
Economic prosperity	(-7.50)	(-4.61)	(-6.25)	(-4.32)	(-4.34)	(-3.63)
Size of the State	0.145***	0.208*	0.095	0.115*	0.108	0.040
Size of the State	(3.10)	(1.86)	(1.38)	(1.83)	(1.63)	(0.62)
Protestants	-0.123***	-0.061	-0.103**	-0.091*	-0.077	-0.028
Protestants	(-3.51)	(-0.62)	(-2.14)	(-1.74)	(-1.05)	(-0.32)
British colony	-0.050	0.045	-0.012	-0.064	-0.204	0.001
British colony	(-0.63)	(0.22)	(-0.13)	(-0.65)	(-1.47)	(0)
Democracy	-0.254***	-0.185	-0.261***	-0.259***	-0.309***	-0.224***
Democracy	(-5.14)	(-1.46)	(-4.55)	(-4.05)	(-4.13)	(-4.49)
Economic freedom	-0.283***	-0.400***	-0.272***	-0.237***	-0.194***	-0.255***
Economic freedom	(-5.60)	(-3.00)	(-4.06)	(-2.93)	(-2.97)	(-4.37)
Constants	0.013	-0.517***	-0.257***	0.033	0.343***	0.569***
Constants	(0.30)	(-4.40)	(-5.42)	(0.55)	(5.46)	(10.48)
Second specification
Economic prosperity	-0.396***	-0.433***	-0.427***	-0.436***	-0.350***	-0.264***
Economic prosperity	(-7.68)	(-3.55)	(-4.26)	(-4.2)	(-4.43)	(-3.12)
Size of the State	0.089**	0.173*	0.066	0.070	0.028	0.003
Size of the State	(2.05)	(1.73)	(1.03)	(1.19)	(0.45)	(0.06)
Protestants	-0.093***	-0.016	-0.087	-0.083*	-0.047	0.000
Protestants	(-2.60)	(-0.19)	(-1.56)	(-1.7)	(-0.73)	(0)
British colony	-0.076	-0.041	-0.094	-0.087	-0.190	-0.096
British colony	(-1.00)	(-0.22)	(-0.95)	(-0.88)	(-1.47)	(-0.62)
Democracy	0.408**	0.750*	0.268	0.429*	0.358	0.372
Democracy	(2.22)	(1.83)	(0.85)	(1.72)	(1.34)	(1.24)
Economic freedom	-0.606***	-0.803***	-0.558***	-0.605***	-0.554***	-0.541***
Economic freedom	(-6.07)	(-3.84)	(-3.67)	(-4.09)	(-3.87)	(-3.19)
Joint effect	-0.564***	-0.770**	-0.494*	-0.580**	-0.558**	-0.491**
Joint effect	(-3.63)	(-2.17)	(-1.81)	(-2.59)	(-2.43)	(-2.02)
Constants	0.019	-0.553***	-0.219	0.008	0.333***	0.555***
Constants	(0.47)	(-5.21)	(-4.27)	(0.14)	(5.63)	(10.99)

\min [\sum_{i \in \{i : y_{i} > x^{'} i β\}} q |y_{i} - x^{'} i β| + \sum_{i \in \{i : y_{i} > x^{'} i β\}} (1 - q) |y_{i} - x^{'} i β|

{C P I}_{i} = β_{0} + β_{1} {D E M O}_{i} + β_{2} {E F}_{i} + β_{3} {D E M O}_{i} * {E F}_{i} + β_{4} {G P D}_{i} + β_{5} {G S}_{i} + β_{7} {C O L}_{i} + β_{6} {P R O T}_{i} + ε_{i}

{C P I}_{i} = β_{0} + β_{1} {D E M O}_{i} + β_{2} {E F}_{i} + β_{3} {D E M O}_{i} * {E F}_{i} + β_{4} {G P D}_{i} + β_{5} {G S}_{i} + β_{7} {C O L}_{i} + β_{6} {P R O T}_{i} + ε_{i}

[1] Cristian Johan Picón Viana - Masters degree in Economics from the Universidad del Norte; PhD student in Social Sciences (Becario Colciencias); Teacher and researcher in the Department of Economic Sciences at the Universidad de la Costa (CUC). E-mail: cpicon@cuc.edu.co

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The joint effect of democracy and economic freedom on corruption

Abstract