Corruption, Product Market Competition, and Institutional Quality: Empirical Evidence from the U.S. States

23 Pages Posted: 21 Nov 2016

See all articles by Jamie Bologna Pavlik

Jamie Bologna Pavlik

Texas Tech University - Department of Agricultural and Applied Economics

Date Written: January 2017

Abstract

This article 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 U.S. states from 1997 to 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.

JEL Classification: D73, O17, L26

Suggested Citation

Bologna Pavlik, Jamie, Corruption, Product Market Competition, and Institutional Quality: Empirical Evidence from the U.S. States (January 2017). Economic Inquiry, Vol. 55, Issue 1, pp. 137-159, 2017, Available at SSRN: https://ssrn.com/abstract=2872446 or http://dx.doi.org/10.1111/ecin.12378

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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