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Corruption as a response to regulation

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  • O1 - Economic Development
  • D7 - Analysis Of Collective Decision-Making
  • H7 - State And Local Government
  • Intergovernmental Relations
  • K4 - Legal Procedure
  • The Legal System
  • And Illegal Behavior
  • Political Science


Previous research has found a negative effect of corruption on growth in the United States. However, some theory suggests corruption might have a positive impact in places with dysfunctional political institutions. This paper investigates whether the corruption-growth link is conditional on the extent of government involvement across U.S. states. Even though no state approaches the level of government intervention found in many developing countries, we still find evidence that corruption’s harmful effects on growth are smaller when regulation is greater.

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