Recent Papers Published/Forthcoming
Contagious Corruption, Informal Employment, and Income: Evidence from Brazilian Municipalities, forthcoming at The Annals of Regional Science
Using data on 434 Brazilian municipalities, this paper estimates the effect of both corruption and the size of the informal sector on economic outcomes, while allowing for the possibility of spatial dependence. Overall, this paper finds that the size of the informal sector has a statistically significant and negative impact on economic outcomes that is much larger in magnitude than what is predicted by least-squares estimates due to its exclusion of spillover effects, while the effect of corruption is largely insignificant. Specifically, a one standard deviation increase in the size of the informal sector is associated with a 26 percent cumulative decrease in GDP per-capita, compared to the maximum of a 17 percent decline predicted by least-squares.
Corruption, Product Market Competition, and Institutional Quality: Empirical Evidence from the US States, forthcoming at Economic Inquiry
This paper 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 less competition. Conversely, in areas with low-quality institutions (e.g., excessively burdensome regulations) corruption may lead to more competition. I employ unique data on competition, corruption, and institutional quality across US states from 1997-2009 and report that a higher level of corruption is associated with more competition in states with low levels of institutional quality. However, as institutional quality improves, the positive effect of corruption decreases in magnitude and becomes negative at high levels of institutional quality.
The Effect of Informal Employment and Corruption on Income Levels in Brazil, forthcoming at Journal of Comparative Economics
This paper exploits a unique data set on corruption and informal sector employment in 476 Brazilian municipalities to estimate whether corruption impacts GDP or income levels once variation in informal economic activity is taken into account. Overall, I find that higher levels of corruption and a larger informal economy are generally associated with poor economic outcomes. However, only the size of the informal economy has a statistically significant effect. This effect is robust to the inclusion of a variety of controls and fixed effects, as well as an instrumental variable analysis. Further, these effects are large in magnitude. Over a four year period, a one standard deviation increase in the share of total employees that are informally employed explains a decrease in GDP per-capita of about 18 percent.
Crises and Government: Some Empirical Evidence, Contemporary Economic Policy (2016) 34(2), 234 -239.
(with Andrew T. Young)
We examine a panel of 70 countries during 1966-2010 and utilize Reinhart and Rogoff crisis dates to estimate the effects of crises on the size and scope of government over both 5-year and 10-year horizons. We also estimate cross-section regressions using 40-year (1970-2010) changes in government variables. In general, the estimated effects of crises on government size/scope are statistically insignificant. We report reasonably robust evidence that inflation and currency crises lead to decreases in the extent of government regulations throughout an economy over a 10-year horizon. Also, over the 40-year period, countries that spent more years in crisis are associated with weaker legal systems and property rights. The size and scope of government appears to be persistent to the extent that even crisis episodes fail to leave a significant mark upon them. A notable exception may be that, over 40-year periods, countries that spend more years in crisis are associated with weaker legal systems and property rights.
A Spatial Analysis of Incomes and Institutional Quality: Evidence from US Metropolitan Areas, (2016) Journal of Institutional Economics 12(1), 191 - 216.
(with Donald J. Lacombe and Andrew T. Young)
We use the Stansel (2013) metropolitan area economic freedom index and 25 conditioning variables to analyze the spatial relationships between institutional quality and economic outcomes across 381 U.S. metropolitan areas. Specifically, we allow for spatial dependence in both the dependent and independent variables and estimate how economic freedom impacts both per capita income growth and per capita income levels. We find that economic freedom and per capita income growth and income levels are directly and positively related. Furthermore, we find that the total (direct plus indirect) effects on all metropolitan areas are positive and larger in magnitude than the direct effects alone, indicating that freedom-enhancing reforms in one metropolitan area lead to positive-sum games with neighboring metropolitan areas.
Corruption and Entrepreneurship: Evidence from Brazilian Municipalities, (2015) Public Choice 165(1), 59- 77.
(with Amanda Ross)
We estimate the effect of corruption on business activity in Brazilian municipalities. We employ a new measure of corruption based on data from random audits of municipal governments. Our results suggest that higher levels of corruption are generally associated with reductions in the number of business establishments. Furthermore, we find that these effects become larger over time, suggesting that corruption is particularly detrimental over the long-run. However, we also find that the effect of corruption on business activity can be insignificant or even positive conditional on institutional quality being very poor. This is consistent with the “grease the wheels” hypothesis, which argues that corruption provides entrepreneurs with means to avoid burdensome regulations and taxes.
A Spatial Analysis of Entrepreneurship and Institutional Quality: Evidence from U.S. Metropolitan Areas, (2015) Journal of Regional Analysis and Policy 44 (2), 109-131.
This paper uses the Stansel (2013) economic freedom index for a maximum of 375 U.S. metropolitan areas to estimate the effect of economic freedom on entrepreneurship while controlling for spatial dependence. This paper finds statistically significant evidence that increases in economic freedom in one area result in increases in entrepreneurial activity in neighboring areas. Furthermore, the total (direct plus indirect) effects of an increase in economic freedom on entrepreneurship are positive and statistically significant, indicating that a positivesum game is present. However, these effects are small in magnitude. In order to explain a cumulative one standard deviation increase in either one of the entrepreneurial measures presented in this paper, there would have to be an increase in the freedom index equivalent to moving from the least-free area to the most-free area.
Is the Internet an Effective Mechanism for Reducing Corruption Experience? Evidence from a Cross-Section of Countries, (2014) Applied Economics Letters 21 (10), 687-691.
This article develops an indicator of Internet awareness on corruption as described in Goelet al. (2012) to see how this impacts both corruption perceptions and corruption experience. The results confirm the finding of Goel et al. (2012) that corruption perceptions are highly influenced by Internet awareness. However, the effect Internet awareness has on corruption experience is unclear. This article finds that Internet awareness decreases the frequency of corruption experience of households, while it increases the frequency of corruption experience in firms. Overall, the results suggest that the effect Internet awareness has on corruption is highly sensitive to the corruption measures used and the time the Internet data is constructed.