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 novel panel dataset covering 20 Indian states and the periods 2005 and 2008 we are able to estimate the causal effects of economic growth and law on corruption. Tackling for endogeneity, omitted fixed factors, and other nationwide changes which may be affecting corruption we find that economic growth reduces overall corruption as well as corruption in banking, land administration, education, electricity, and hospitals. Growth however has little impact on corruption perception. In contrast the RTI Act reduces both corruption experience and corruption perception.