August 30, 2010

Corruption is Bad for Growth (Even in the United States)

  • Noel D. Johnson

    Senior Research Fellow
  • Courtney LaFountain

    Senior Economist, U.S. Government Accountability Office
  • Steven Yamarik

    Professor of Economics, California State University in Long Beach

This paper estimates the impact of corruption on growth of output per worker in U.S. states.  It improves on existing studies of the cost of corruption by using a better specified empirical model, focusing on a study population that is less likely to be affected by parameter heterogeneity, and controlling for endogeneity using political variables to instrument for corruption. The authors find that corruption plays a significant and causal role in lowering growth and investment across the States.

This article can be purchased from SpringerLink.