Does corruption slow down innovation? Evidence from a cointegrated panel of U.S. states |
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| Affiliation: | 1. Department of Economics and Business Economics, Aarhus University, Denmark;2. PeRCent, CESifo, CEPR, IZA;1. University of Magdeburg, Halle Institute for Economic Research, Germany;2. Halle Institute for Economic Research (IWH), Germany;3. University of Halle-Wittenberg, Halle Institute for Economic Research, Germany;1. University of Zurich, Switzerland;2. Heilbronn University of Applied Sciences, Germany;3. School of Politics and International Relations, University College Dublin, Republic of Ireland |
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| Abstract: | I investigate the long-run relationship between corruption and innovative activity using annual data from 48 contiguous U.S. states between 1977 and 2006. Using U.S. data allows me to work with a panel long enough to exploit time series properties of the data. I use two different measures of innovative activity: one measuring the quantity and the other measuring the quality of the patents granted. I also use two different measures of corruption: one based on the number of corruption convictions, the other based on number of corruption stories covered in Associated Press news wires. Following Pedroni (1999, 2000), I estimate the cointegrating relationship between corruption and innovative activity with Fully Modified Ordinary Least Squares (FMOLS). The results indicate that corruption indeed slows down innovation in the long-run. |
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| Keywords: | Corruption Innovation U.S. states Panel cointegration D72 O31 |
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