Economic Growth, Law and Corruption: Evidence from India
AbstractIn Is corruption influenced by economic growth? Are legal institutions such as the 'Right to Information Act (RTI) 2005' in India effective in curbing corruption? Using a novel panel dataset covering 20 Indian states and the periods 2005 and 2008 we estimate the causal effects of economic growth and law on corruption. To tackle endogeneity concerns we use forest share to total land area as an instrument for economic growth. We notice that forest share is a positive predictor of growth. This is in line with the view that forestry contributes positively to economic growth. To capture the effect of law on corruption we use the 'difference-in-difference' estimation method. Our results indicate that economic growth reduces overall corruption as well as corruption in banking, land administration, education, electricity, and hospitals. Growth however has little impact on corruption perception. In contrast the RTI Act reduces both corruption experience and corruption perception. Our basic result holds after controlling for state fixed effects and various additional covariates. It is also robust to alternative instruments and outlier sensitivity tests.
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Bibliographic InfoPaper provided by The Australian National University, Australia South Asia Research Centre in its series ASARC Working Papers with number 2009-15.
Date of creation: 2009
Date of revision:
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Economic Growth; Law; Corruption;
Other versions of this item:
- Sambit Bhattacharyya & Raghbendra Jha, 2013. "Economic Growth, Law, and Corruption: Evidence from India," Comparative Economic Studies, Palgrave Macmillan, vol. 55(2), pages 287-313, June.
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- H0 - Public Economics - - General
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-19 (All new papers)
- NEP-DEV-2009-09-19 (Development)
- NEP-FDG-2009-09-19 (Financial Development & Growth)
- NEP-LAW-2009-09-19 (Law & Economics)
- NEP-POL-2009-09-19 (Positive Political Economics)
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