Does financial crime undermine economic freedom? Global evidence across agriculture and industrial economies

Abstract

This study examines the impact of financial crime on economic freedom using panel data for 46 countries over the period 2015-2024, focusing on key dimensions of financial crime: corruption, money laundering, shadow economy activity, and cybersecurity governance. The empirical results confirm a statistically significant negative effect of corruption, money laundering risk, and shadow economy size on economic freedom, while stronger cybersecurity governance is positively associated with economic freedom. The adverse association is more visible in countries where agriculture plays a larger role in the economic structure. These findings suggest that structural characteristics condition the transmission of institutional weaknesses into broader economic outcomes. This study contributes to the comparative institutional economics literature by providing large-scale cross-country evidence on the systemic channels through which financial crime constrains economic freedom, and by demonstrating that sectoral structure conditions the transmission of institutional weaknesses into market outcomes.