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The effect of corruption on the manufacturing sector in India

Atsushi Kato () and Takahiro Sato

Economics of Governance, 2014, vol. 15, issue 2, 155-178

Abstract: This article investigates the effects of corruption on the performance of the manufacturing sector at the state level in India. We employ conviction rates of corruption-related cases as an instrument for the extent of corruption, address the underreporting problem, and examine the impact of corruption on the gross value added per worker, total factor productivity, and capital-labor ratio of three-digit manufacturing industries in each state. Our estimation results show that corruption reduces gross value added per worker and total factor productivity. Furthermore, we show that the adverse effects of corruption are more salient in industries with smaller average firm size. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Corruption; Gross value added; Total factor productivity; Scale economies; D73; K42; O43 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s10101-014-0140-y

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