Does corruption ever help entrepreneurship?
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The current literature contains mixed results regarding the impact of corruption on entrepreneurship and economic growth. In this paper, we examine a much larger set of countries and time periods to attempt to gain insights into this relationship. In particular, the central question is whether corruption can compensate for a bad business climate. Our results are clear; corruption hurts entrepreneurship. The impact is smaller, but remains negative, when business climates are bad. This is in contrast to previous literature that suggests corruption may increase entrepreneurship under a bad business climate. We find corruption never improves entrepreneurship; it simply hurts less when business climates are not conducive to growth in the first place.
KeywordsEntrepreneurship Corruption Business regulations
JEL ClassificationsD73 L26 O43
We thank the editor and the referees for their invaluable comments and suggestions. We also thank the session participants at Southern Economic Association, 2013, and the seminar participants at University of Wollongong, Wollongong, New South Wales, Australia, for their feedback.
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