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Economic Growth, Law and Corruption: Evidence from India

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  • Sambit Bhattacharyya

    ()

  • Raghbendra Jha

    ()

Abstract

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.

Suggested Citation

  • Sambit Bhattacharyya & Raghbendra Jha, 2009. "Economic Growth, Law and Corruption: Evidence from India," ASARC Working Papers 2009-15, The Australian National University, Australia South Asia Research Centre.
  • Handle: RePEc:pas:asarcc:2009-15
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    File URL: https://crawford.anu.edu.au/acde/asarc/pdf/papers/2009/WP2009_15.pdf
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    Cited by:

    1. Eiji Yamamura, 2012. "Groups and information disclosure: evidence on the Olson and Putnam hypotheses in Japan," International Journal of Social Economics, Emerald Group Publishing, vol. 39(6), pages 423-439, May.
    2. Yamamura, Eiji, 2011. "Groups and information disclosure: Olson and Putnam Hypotheses," MPRA Paper 34628, University Library of Munich, Germany.
    3. Pethe, Abhay & Tandel, Vaidehi & Gandhi, Sahil, 2012. "Unravelling the anatomy of legal corruption in India: Focusing on the ‘honest graft’ by the politicians," MPRA Paper 39306, University Library of Munich, Germany.
    4. Yamamura, Eiji, 2012. "Effects of groups and government size on information disclosure," MPRA Paper 36141, University Library of Munich, Germany.

    More about this item

    Keywords

    Economic Growth; Law; Corruption;

    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, Innovation, Technological Change, and Growth - - Economic Development

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