Corruption and Social Interaction: Evidence from China
22 Pages Posted: 8 Feb 2011
Date Written: February 7, 2011
We explore theoretically and empirically whether social interaction, including local and global interaction, influences the incidence of corruption. We first present an interaction-based model on corruption that predicts that the level of corruption is positively associated with social interaction. Then we empirically verify the theoretical prediction using within-country evidence at the province-level in China during 1998 to 2007. Panel data evidence clearly indicates that social interaction has a statistically significantly positive effect on the corruption rate in China. Our findings, therefore, underscore the relevance of social interaction in understanding corruption.
Keywords: Corruption, Social Interaction, China
JEL Classification: K42, D72, D64, O17, J24
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