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Fiscal consequences of public corruption: Empirical evidence from state bond ratings

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  • Craig Depken
  • Courtney Lafountain

Abstract

Empirical analyses of public corruption focus predominantly on international differences; regional differences in public corruption within a single country receive little attention. We empirically investigate the effect of public corruption in the United States on state bond ratings, which previous research shows are inversely related to net interest costs on public debt. After controlling for various economic influences on bond ratings, we find that more corrupt states have lower bond ratings, which implies that taxpayers in more corrupt states face a negative pecuniary externality by paying a premium for debt. Copyright Springer Science + Business Media, Inc. 2006

Suggested Citation

  • Craig Depken & Courtney Lafountain, 2006. "Fiscal consequences of public corruption: Empirical evidence from state bond ratings," Public Choice, Springer, vol. 126(1), pages 75-85, January.
    • Handle: RePEc:kap:pubcho:v:126:y:2006:i:1:p:75-85
    DOI: 10.1007/s11127-006-4315-0
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