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The effect of corruption on the manufacturing sector in India

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  • Atsushi Kato

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  • Takahiro Sato

Abstract

This article investigates the effects of corruption on the performance of the manufacturing sector at the state level in India. We employ conviction rates of corruption-related cases as an instrument for the extent of corruption, address the underreporting problem, and examine the impact of corruption on the gross value added per worker, total factor productivity, and capital-labor ratio of three-digit manufacturing industries in each state. Our estimation results show that corruption reduces gross value added per worker and total factor productivity. Furthermore, we show that the adverse effects of corruption are more salient in industries with smaller average firm size. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Atsushi Kato & Takahiro Sato, 2014. "The effect of corruption on the manufacturing sector in India," Economics of Governance, Springer, vol. 15(2), pages 155-178, May.
  • Handle: RePEc:spr:ecogov:v:15:y:2014:i:2:p:155-178
    DOI: 10.1007/s10101-014-0140-y
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    Cited by:

    1. repec:gam:jecomi:v:5:y:2017:i:4:p:45-:d:119541 is not listed on IDEAS
    2. Subramaniam Ananthram & Christopher Chan, 2016. "Religiosity, spirituality and ethical decision-making: Perspectives from executives in Indian multinational enterprises," Asia Pacific Journal of Management, Springer, vol. 33(3), pages 843-880, September.
    3. Nguyen, Ngoc Anh & Doan, Quang Hung & Nguyen, Ngoc Minh & Tran-Nam, Binh, 2016. "The impact of petty corruption on firm innovation in Vietnam," MPRA Paper 71902, University Library of Munich, Germany.
    4. repec:eee:finlet:v:24:y:2018:i:c:p:179-185 is not listed on IDEAS

    More about this item

    Keywords

    Corruption; Gross value added; Total factor productivity; Scale economies; D73; K42; O43;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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