Political decentralization and corruption: Evidence from around the world

Abstract

How does political decentralization affect the frequency and costliness of bribe-extraction by corrupt officials? Previous empirical studies, using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization, have suggested conflicting conclusions. In search of more precise findings, we combine and explore two new data sources-an original cross-national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms' concrete experiences with bribery. In countries with a larger number of government or administrative tiers and (given local revenues) a larger number of local public employees, reported bribery was more frequent. When local-or central-governments received a larger share of GDP in revenue, bribery was less frequent. Overall, the results suggest the danger of uncoordinated rent-seeking as government structures become more complex.

Political stability, corruption and trust in politicians

“…If the income effect outweighs the political instability effect then bribe-taking decreases. This result is in line with the empirical findings in Fan et al [27] who show that if governments receive more taxes then this generally reduces bribery.…”

Gender and Corruption in Business

“…Second, we use a dummy variable that takes a value of one if some of the firm's sales are not national sales, allowing us to control for the possibility that exportoriented firms may come into contact with a greater variety of public officials. Third, we control for firm size using the natural logarithm of sales (see Fan et al, 2009). Fourth, we include a variable which measures the extent of state ownership (see Fan et al, 2009;Billon and Gillanders, 2014).…”

“…Third, we control for firm size using the natural logarithm of sales (see Fan et al, 2009). Fourth, we include a variable which measures the extent of state ownership (see Fan et al, 2009;Billon and Gillanders, 2014). 4 Like our foreign ownership variable, state-owned companies have access to different social and political networks, potentially affecting the level of bribery.…”

“…The first major obstacle is the challenge of measuring corruption. The majority of studies that we have examined tend to use perception-based measures, which have been criticised as suffering potentially from perception biases (Svensson, 2003;Reinikka & Svensson, 2006;Fan, Lin & Treisman, 2009) and a tendency to lag reality (Knack, 2007;Kenny, 2009). …”

Economic Growth, Law, and Corruption: Evidence from India

“…Bhattacharyya and Hodler (2010), using a game theoretic model and cross-national panel data, estimate a reduced-form econometric model and show that resource rent is bad for corruption although the effect is moderated by strong democratic institutions. In contrast, Fan et al (2009) show that decentralized government may not increase accountability and reduce corruption if the government structures are complex. In a similar vein, 6 Ades and Di Tella (1999), Rose-Ackerman (1999), Leite and Weidmann (1999), Dabla-Norris (2000) are other important contributions in this literature.…”