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Does the Internet Reduce Corruption?
Evidence from U.S. States and Across Countries
Abstract
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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