Corruption in America

We use a data set of federal corruption convictions in the U.S. to investigate the causes and consequences of corruption. More educated states, and to a smaller degree richer states, have less corruption. This relationship holds even when we use historical factors like Congregationalism in 1890 as an instrument for the level of schooling today. The level of corruption is also correlated with the level of income inequality and racial fractionalization, and uncorrelated with the size of government. There is a weak negative relationship between corruption and economic development in a state. These results echo the cross-country findings, and support the view that the correlation between development and good political outcomes occurs because education improves political institutions. (c) 2005 Elsevier B.V. All rights reserved.