۱- Introduction

۲- Literature review

۳- Data

۴- Methodology

۵- Estimation

۶- Conclusion

References

Abstract

Purpose – The purpose of this paper is to show that states where corruption is greater also have higher levels of inflation.
Design/methodology/approach – Using a sample of all US states through the period 1992-2007 and various factors common across states that could impact the level of corruption or inflation, multiple regression techniques are used to determine corruption impact to inflation.
Findings – The study finds that corruption contributes, along with aid transfer, positively to inflation in the US states. The results are robust even after scaling the corruption variable to different determinants.
Originality/value – While there is some evidence on the relationship between corruption and inflation in cross-country dataset, there is no such evidence on it within country dataset. This paper, however, provides evidence on the relationship between corruption and inflation using state-level data of the US states.

Introduction

The relationship between corruption and inflation using data from many countries has lately received more attention. However, country level data include a great deal of noise resulting from the presence of historical, cultural, and political differences, among others. Substantial differences such as these have been used to negatively judge the findings of cross-country studies. To identify the true relationship between corruption and inflation, it would be best to have access to a data set in which these historical, cultural, political, institutional and other differences are minimized. However, such a data set would be hard to find. In its absence, we can examine this important relationship by making use of data from various regions within a country. One crucial shortcoming of this approach is that regional inflation data are not readily available and there is virtually no data regarding regional corruption rates. Despite the paucity of data, William et al. (2000, 2004, 2009) collected consistent inflation data for all of the US states for the period 1960 to 2007, solving one of the two big problems related to data availability at the regional level. Regarding data on corruption, we have located some indirect estimates for all of US States. Researchers including Rajeev and Daniel (1989), Raymond and Roberta (2002) and Edward and Raven (2006) have presented data on corruption in form of convicted public officials. The availability of data on these two crucial variables has allowed us to make an attempt to examine the relationship between corruption and inflation using data on US states. The data on US states are well suited to our purposes because of its availability, quality, and comparability.