Does the Internet Reduce Corruption?
Evidence from U.S. States and Across Countries
With Thomas B. Andersen, Jeanet Bentzen and Pablo SelayaAbstract:
The Internet is often claimed to be a powerful anti-corruption technology. In theory, the Internet raises information levels and thus detection risks. Further, by enabling e-government, it obviates bureaucrats’ intermediary role in the provision of public services and increases transparency. To examine the Internet/corruption nexus empirically, we develop a novel identification strategy for Internet diffusion. Power disruptions damage digital equipment, which increases the user cost of IT capital and thus lowers the speed of Internet diffusion. A natural phenomenon causing power disruptions is lightning activity, which makes lightning a viable instrument for Internet diffusion. Using global satellite data and data from ground-based lightning detection censors, we construct lightning density data for a large cross section of countries and for the contiguous U.S. states. Empirically, lightning density is a strong instrument for Internet diffusion. Our IV estimates show that Internet diffusion has reduced the extent of corruption across countries and across U.S. states.
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(A previous version of this paper was circulated under the title "On the Impact of Digital Technologies on Corruption: Evidence from U.S. States and Across Countries"; Discussion paper No. 08-11, Department of Economics, University of Copenhagen)
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