Corruption, Product Market Competition, and Institutional Quality: Empirical Evidence from the US States

Forthcoming at Economic Inquiry

48 Pages Posted: 22 Sep 2015 Last revised: 6 May 2016

See all articles by Jamie Bologna Pavlik

Jamie Bologna Pavlik

Texas Tech University - Department of Agricultural and Applied Economics

Date Written: May 5, 2016

Abstract

This paper argues that the effect of corruption on competition is dependent on the institutional environment. When institutions are relatively efficient, observed corruption is likely to be associated with relatively less competition. Conversely, in areas with low quality institutions (e.g., excessively burdensome regulations) corruption may lead to relatively more competition. I employ unique data on competition, corruption, and institutional quality across US states from 1997-2009 and report that a higher level of corruption is associated with relatively more competition in states with low levels of institutional quality. However, as institutional quality improves, the effect of corruption worsens. Thus, institutional quality is a fundamental determinant of the corruption-competition relationship. Improving institutional quality, while at the same time reducing corruption, will increase competition and likely improve economic outcomes.

Keywords: Corruption, competition, institutional quality

JEL Classification: D73, O17, L26

Suggested Citation

Bologna Pavlik, Jamie, Corruption, Product Market Competition, and Institutional Quality: Empirical Evidence from the US States (May 5, 2016). Forthcoming at Economic Inquiry, Available at SSRN: https://ssrn.com/abstract=2662203 or http://dx.doi.org/10.2139/ssrn.2662203

Jamie Bologna Pavlik (Contact Author)

Texas Tech University - Department of Agricultural and Applied Economics ( email )

Suite 167, 2625 Memorial Circle
TTU Administration
Lubbock, TX 79409
United States

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