engleski

Relationship between Property Rights Enforcement and Corruption – Panel Analysis of EU Countries

We investigate the relationship between property rights enforcement and corruption in EU countries. Property rights are the basic economic institution enabling commerce as a form of exchange of titles. Property rights enable the building of rational expectations about the results of future actions. Therefore, by reducing insecurity, property rights provide incentives for investment, wealth formation, specialization, production, and trade. Corruption is an institutional dysfunction caused by the relationship between private and governmental sector consisting of an act of abuse of power by governmental employees for the purpose of private gain. Corruption was, until recently, mainly analysed as an independent variable. We permit for endogeneity of both variables when regressing the composite index of perception of freedom from corruption against the composite index of property rights enforcement. The choice of variables and the model follows from the theoretical background of the Economic analysis of law and property rights literature. The study is conducted as a panel data analysis of the EU28+2 countries over 21 years. The analysis suggests that corruption is a consequence of the embodiment and enforcement of a formal institution of “property rights”.

corruption ; institutions ; property rights ; public policy

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