DO VARIOUS FORMS OF CORRUPTION EXERT DIFFERENT EFFECTS ON ENTREPRENEURSHIP: EVIDENCE FROM CEE (POST)TRANSITION COUNTRIES

Abstract

The paper analyses the effect of different forms of corruption on entrepreneurship in a sample of Central and Eastern European countries: Albania, Bulgaria, Croatia, Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Montenegro, North Macedonia, Serbia, Romania, Slovakia and Slovenia. The contribution of this paper is twofold. The paper contributes to the existing literature through panel data analysis of the effect of various forms of corruption on new business density rates in the 2006-2020 period. The types of corruption included in the analysis cover judicial, legislative, executive, and public sector corruption, and political corruption index as the aggregate measure. The results show that not all corruption types have the same effect on entrepreneurship. Aggregate measure of political corruption adversely affects formal entrepreneurship. However, three particular types of corruption – public sector corruption, legislative corrupt activities and judicial corruption – have opposite effects. While public sector corruption and legislative corrupt activities harm the new business density rate, it is shown that larger judicial corruption is positively related to the number of newly registered firms.