Economic growth, law, and corruption: evidence from India

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 panel dataset covering 20 Indian states for the years 2005 and 2008 we estimate the effects of growth and law on corruption. Accounting for endogeneity, omitted fixed factors, and other nationwide changes we find that economic growth reduces overall corruption as well as corruption in banking, land administration, education, electricity, and hospitals. Growth reduces bribes but has little impact on corruption perception. In contrast the RTI Act reduces both corruption experience and corruption perception