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Working Papers

Recent Working Papers Under Review

Does Corruption Impact the Formal-Informal Sector Income Gap? Evidence from Brazil
(with Amir B Ferreira Neto)

Many countries rely on the informal economy to provide a major portion of existing jobs, despite the fact that these jobs are low paying. These same countries also seem to experience a significant amount of corruption. It is possible that corruption exacerbates the existing formal-informal gap, as corruption tends to increase income inequality. Using a combination of individual and municipal level data from Brazil, we show that this is in fact the case. The formal-informal income gap is larger in municipalities that experience more corruption. This finding holds even after controlling for selection into the informal sector and is robust to the exclusion of taxes and corruption related costs from income. Thus, a possible way to address the formal-informal income gap problem may be to first address the problem of corruption.

Reported Corruption Convictions and Political Importance: Do Conviction Rates Systematically Differ Across US States?

Using state level data on corruption convictions from the U.S. Department of Justice’s Public Integrity Section (PIN) and political importance over five consecutive presidential terms from 1993-2012, I find evidence that reported federal corruption convictions tend to be higher in politically important states. However, this effect decreases in magnitude and becomes statistically insignificant when states have a governor of the same political party as the president. Thus, corruption convictions are systematically different across states based on political factors.

Papers with Revisions Requested

Corruption: The Good, the Bad, and the Uncertain revisions submitted at the Review of Development Economics

This paper argues that the effect corruption has on economic growth depends on the uncertainty involved. Employing data on a cross-section of counties, this paper uses an interaction between the frequency of bribery payments and the uncertainty regarding the delivery of the service in exchange for these bribes, to show that, overall, corruption has a negative impact on growth, unless the uncertainty is minimal. Furthermore, the negative effect of corruption becomes larger in magnitude with higher levels of uncertainty. At extremely high levels of uncertainty a relatively small increase in corruption, equivalent to moving from Sweden to the United States for example, is associated with economically large decreases in economic growth.