Impact of Economic Freedom on Corruption Revisited in ASEAN Countries: A Bayesian Hierarchical Mixed-Effects Analysis

Abstract

Conceptual and applied studies assessing the linkage between economic freedom and corruption expect that economic freedom boosts economic growth, improves income, and reduces levels of corruption. However, most of them have concentrated on developed and developing groups, while the Association of Southeast Asian Nations (ASEAN) countries have drawn much less attention. Empirical findings are most often conflicting. Moreover, previous studies performed rather simple frequentist techniques regressing one or some freedom indices on corruption that do not allow for grasping all the aspects of economic freedom as well as capturing variations across countries. The study aims to investigate the effects of ten components of economic freedom index on the level of corruption in ten ASEAN countries from 1999 to 2018. By applying a Bayesian hierarchical mixed-effects regression via a Monte Carlo technique combined with the Gibbs sampler, the obtained results suggest several findings as follows: (i) In view of probability, the predictors property rights, government integrity, tax burden, business freedom, labor freedom, and investment freedom have a strongly positive impact on the response perceived corruption index; (ii) Government spending, trade freedom, and financial freedom exert a strongly negative effect, while the influence of monetary freedom is ambiguous; and (iii) There is an existence of not only random intercepts but also random coefficients at the country level impacting the model outcome. The empirical outcome could be of major importance for more efficient corruption controlling in emerging countries, including ASEAN nations.

The Role of Economic Freedom in Interpreting Corruption Perception

“…This inefficient government management on allocating expenditure among related sectors leads to higher corruption (Hashem, 2014;Jajkowicz & Drobiszová, 2015). Fourthly, Governments should encourage residents and social-political organizations to campaign against corruption or participate in the ongoing process of anti-corruption campaigns (Thach and Ngoc, 2021). Lastly, the policy of trade and investment freedom should be rearranged with a transparency perspective and maximum local benefits.…”

Corruption and corporate leverage in an emerging economy: The role of economic freedom

“…Institutional quality has become an emerging issue in recent studies, because it plays a crucial role as an external governance mechanism for shaping corporate decision-making. Corruption and EF have been compelling social, political, and economic phenomena that give rise to the deterioration of democracy and diminish government trustworthiness (Nguyen & Bui, 2021). Since institutional development is more pervasive in emerging economies, such as Vietnam, this study investigates the influence of corruption control and EF on corporate leverage.…”

Strengthened rule of law to reduce corruption: evidence from Asia-Pacific countries

“…Economic freedom was calculated using the rule of law criteria, namely, “judicial effectiveness, property rights, and government integrity”. Each of the three factors was rated on a scale from 0 to 100, with a higher value indicating better rule of law (Thach and Ngoc, 2021). This study examined these three components of rule of law because they have not been examined exclusively in previous studies.…”

“…It is also hypothesised that there is a link between the phenomena and that more economic freedom may result in lower intensity of corruption. Thach and Ngoc (2021) analysed the effects of ten components of the economic freedom score on corruption levels in ten ASEAN nations from 1999 to 2018. According to the findings, “property rights, government integrity, tax burden, business freedom, labour freedom, and investment freedom” had a significant positive influence on the perceived corruption index.…”

“…The purpose of this research is to look at the link between rule of law and corruption in the Asia-Pacific countries. Previous research on this issue has focused on various geographical areas, such as Association of Southeast Asian Nations (ASEAN) (Thach and Ngoc, 2021), 164 countries (Yamarik and Redmon, 2017), the USA (Apergis et al , 2012) and South Asian countries (Khandker, 2015). In contrast, this research looked at the influence of the rule of law indicator on corruption in the Asia-Pacific region with the hypothesis that poor rule of law performance promotes higher corruption.…”