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Economics of Governance

, Volume 15, Issue 2, pp 155–178 | Cite as

The effect of corruption on the manufacturing sector in India

  • Atsushi KatoEmail author
  • Takahiro Sato
Original Paper

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.

Keywords

Corruption Gross value added Total factor productivity Scale economies 

JEL Classification

D73 K42 O43 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  1. 1.School of BusinessAoyama Gakuin UniversityTokyoJapan
  2. 2.Research Institute for Economics and Business AdministrationKobe UniversityKobeJapan

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