Public Policy, Firm Size Distribution, and Corruption

This dissertation comprises of three essays related to public economics. The first essay investigates fiscal decentralization and its spillover effects on corruption using US state-level panel data from 1992-2013. This essay uses a spatial estimation technique in order to investigate spillover effects. The study finds strong evidence of spatial dependency and spillover effects of decentralization and also finds a negative relationship between corruption and fiscal decentralization. The second essay examines whether a missing middle exists in the firm-size distribution among developing countries. Using data from the World Bank Enterprise Survey for more than 100 countries, the study estimates the missing middle by comparing the firm size distribution of developed countries with that of developing countries. The study finds that country-level corruption is a contributing factor in determining the missing middle than tax policies, and it concludes that corruption impedes economic growth. The third essay discusses whether there is a structural change in developing countries due to the rapid liberalization of economies. It is evident that structural changes have occurred in the developing countries in recent decades. However, trade liberalization is not a significant factor in determining those changes