Greasing the Wheels? The Effect of Corruption in Regulated Manufacturing Sectors of India


We investigate whether corruption "greases the wheels" of bureaucracies and enhances economic performance. Specifically, we examine the interaction effect of corruption and regulation on the economic performance of manufacturing industries in India. Our estimation results show that the combination of corruption and regulation has significant positive effects on gross value added per worker, total factor productivity, and capital labor ratio. This indicates the existence of a "greasing the wheels" effect.


Corruption, Regulation, Gross value added per worker, TFP

JEL Classification

D73, K42, L52, K23


Takahiro SATO
Research Institute for Economics and Business Administration,
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059

Atsushi KATO
School of Business, Aoyama Gakuin University