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Do infrastructure reforms reduce the effect of corruption ? theory and evidence from Latin America and the Caribbean
 
Author:Wren-Lewis, Liam; Collection Title:Policy Research working paper ; no. WPS 6559
Country:Latin America; Caribbean; Date Stored:2013/08/08
Document Date:2013/08/01Document Type:Policy Research Working Paper
SubTopics:Public Sector Corruption & Anticorruption Measures; Governance Indicators; Economic Theory & Research; National Governance; Banks & Banking ReformLanguage:English
Region:Latin America & CaribbeanReport Number:WPS6559
Volume No:1 of 1  

Summary: This paper investigates the interaction between corruption and governance at the sector level. A simple model illustrates how both an increase in regulatory autonomy and privatization may influence the effect of corruption. The interaction is analyzed empirically using a fixed-effects estimator on a panel of 153 electricity distribution firms across 18 countries in Latin America and the Caribbean from 1995--2007. Greater corruption is associated with lower firm labor productivity, but this association is reduced when an independent regulatory agency is present. These results survive a range of robustness checks, including instrumenting for regulatory governance, controlling for a large range of observables, and using several different corruption measures. The association between corruption and productivity also appears weaker for privately owned firms compared to publicly owned firms, though this result is somewhat less robust.

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