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Prof. LIU’s research shows direct link between corruption and public expenditure

21 Nov, 2018 KDIS News Center 1,523

Professor Cheol LIU’s article titled ‘Public Corruption in the US States and Its Impact on Public Debt Pricing’, co-authored by Tima T. Moldogaziev and Martin J. Luby, was recently nominated among the top 20 most downloaded papers from the Kyklos International Review of Social Science Journal (SSCI) for 2016-2018.

Professor LIU is currently an Assistant Professor at KDI School with a BA from Yonsei University in Humanities, MSc in Economics from the London School of Economics and Political Sciences, and a Ph.D. from Indiana University in Public Finance and Public Policy Analysis with a minor in Economics.

Professor LIU’s research interests lie in areas such as Corruption & Public Finance, Budgeting, and Public Financial Management. His research paper focused on addressing public corruption levels in the United States of America. Deploying a panel regression data collection method across all the 50 states in the US for the period 2005 to 2011, Professor LIU set out to investigate the impact of corruption on public debt prices brought about by retail investors from underwriting banks. By holding most co-variances constant, he observed the relationship between retail mark-ups, as the dependent variable, and corruption as the key independent variable. The total number of observations made was 170,000, providing a comprehensive dataset for analysis.

Initially, before settling on this research study for his Ph.D. dissertation topic, Professor LIU’s supervisor, Dr. John L. Mikesell, provided him with extensive prior research in the field of corruption. Noting the importance of corruption in the global sphere in the face of the skepticism of some of his colleagues on America’s corruption status, let alone the hypothesis that corruption may affect decisions relating to public finance and policy,  Professor LIU became overwhelmingly intrigued to have data define the relationship.

 

 

The findings of his research suggest a significant relationship between both variables even when taking into consideration the existing anti-corruption mechanisms in place. To put it differently, Professor LIU explains that governments issue bonds to raise finances.  However, if the government is corrupt the price of bonds issued by it tends to be low which leads to more bonds being issued, creating national debt. Which begs the question: Who pays the national debt? The tax payers, of course, as increased debts increase taxes. Hence, the findings of this study show a negative association between corruption and retail mark-ups.

Ultimately, this study has not only contributed to Professor LIU’s career development but also added to the existing literature on the domain of corruption in relation to government expenditure. Therefore, from a professional standpoint, these findings have provided Professor LIU with more knowledge and a comprehensive understanding about this field which stands to solidify his expertise and capability for content delivery to the students of KDI School.

 


By Stella CONSELHO (2018 MDP, Mozambique)