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Regulation and Corruption: Evidence from the United States

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  • Sanchari Choudhury

Abstract

I exploit a panel data set on United States for the time span 1990–2013 to evaluate the causal impact of government regulation on bureaucratic corruption. Despite the stylized fact that corruption and regulation are positively correlated, there is a lack of empirical evidence to substantiate a causal relationship. Using novel data on federal regulation of industries (Al‐Ubaydli and McLaughlin [2015], Regulation and Governance, 11, 109–123), and convictions of public officials from the Public Integrity Section, I apply a stochastic frontier approach to account for one‐sided measurement error in bureaucratic corruption and the Lewbel [2012, Journal of Business and Economic Statistics, 30, 67–80] identification strategy to control for potential endogeneity of regulation. Results are striking. Based on the preferred model, there is evidence of endogeneity of regulation and absence of a causal link between regulation and corruption. However, if any of the above two econometric issues are ignored, evidence of a spurious relationship between corruption and regulation is found.

Suggested Citation

  • Sanchari Choudhury, 2021. "Regulation and Corruption: Evidence from the United States," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(4), pages 897-934, August.
    • Handle: RePEc:bla:obuest:v:83:y:2021:i:4:p:897-934
    DOI: 10.1111/obes.12414
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    1. Choudhury, Sanchari, 2023. "Non-random selection into entrepreneurship in the realm of government decentralization and corruption," European Journal of Political Economy, Elsevier, vol. 78(C).
    2. Zachary D. Blizard, 2023. "The Interaction Effect of Economic Freedom and Economic Development on Corruption in US States," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 38(Summer 20), pages 17-37.

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