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Abstract
The paper shows that corruption at the federal level may be contagious for regional governments suggesting that federal structure of the government may be one of the reasons for persistence of corruption. The analysis reveals that well-informed voters may rationally forego their chance to elect a benevolent government and vote for rent-seeking politicians instead. Whereas most models of the political rent seeking in a federation make assumptions about exogenous and independent levels of capture of the central and regional governments the present paper endogenizes the incidence of corruption in a federation.

AbstractThis paper looks at the link between the quality of economic institutions and innovation, and innovation and growth. We construct a measure of the innovation content of individual manufacturing industries and show that countries with stronger economic institutions specialize in more innovation‐intensive industries. Our results also provide evidence that industries involving higher levels of innovation grow relatively faster in countries with better economic institutions. The results suggest that innovation is an important channel through which higher quality economic institutions contribute to better growth performance in the long run.