In 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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Paper provided by Australian National University, Australia South Asia Research Centre in its series ASARC Working Papers with number
2009-15.
Find related papers by JEL classification: 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
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