This paper takes advantage of a new corruption measure across regions within a country to measure the influence of corruption on public spending efficacy in the education sector in Indonesia, one of the most corrupt countries in the world. I find that public spending has a negligible effect on education outcomes in highly corrupt regions, while it has a statistically significant, positive, and relatively large effect in less corrupt regions. I do not find any direct effect of corruption on education outcomes, hence implying that one channel through which corruption adversely affects the education system is through reducing the effectiveness of public spending.
This paper takes advantage of a new corruption measure across regions within a country
to measure the influence of corruption on public spending efficacy in the education
sector in Indonesia, one of the most corrupt countries in the world. I find that public
spending has a negligible effect on education outcomes in highly corrupt regions, while
it has a statistically significant, positive, and relatively large effect in less corrupt
regions. I do not find any direct effect of corruption on education outcomes, hence
implying that one channel through which corruption adversely affects the education
system is through reducing the effectiveness of public spendingThis paper takes advantage of a new corruption measure across regions within a country to measure the influence of corruption on public spending efficacy in the education sector in Indonesia, one of the most corrupt countries in the world. It finds that public spending has a negligible effect on education outcomes in highly corrupt regions, while it has a statistically significant, positive, and relatively large effect in less corrupt regions. It does not find any direct effect of corruption on education outcomes, hence implying that one channel through which corruption adversely affects the education system is through reducing the effectiveness of public spending.