Democracy, Property Rights, Income Equality, and Corruption
AbstractThis paper presents theoretical and empirical evidence on the nexus between corruption and democracy. We establish a political economy model where the effect of democracy on corruption is conditional on income distribution and property rights protection. Our empirical analysis with cross-national panel data provides evidence that is consistent with the theoretical prediction. Moreover, the effect of democratization on corruption depends on the protection of property rights and income equality which shows that corruption is a nonlinear function of these variables. The results indicate that democracy will work better as a control of corruption if the property right system works and there is a low level of income inequality. On the other hand if property rights are not secured and there is strong income inequality, democracy may even lead to an increase of corruption. In addition, property rights protection and the mitigation of income inequality contribute in a strong manner to the reduction of corruption.
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Bibliographic InfoPaper provided by Center for Research in Economics, Management and the Arts (CREMA) in its series CREMA Working Paper Series with number 2010-23.
Date of creation: Nov 2010
Date of revision:
Corruption; Democracy; Income inequality; Property rights;
Other versions of this item:
- Bin Dong & Benno Torgler, 2010. "Democracy, Property Rights, Income Equalilty, and Corruption," School of Economics and Finance Discussion Papers and Working Papers Series 262, School of Economics and Finance, Queensland University of Technology.
- Bin Dong & Benno Torgler, 2011. "Democracy, Property Rights, Income Equality, and Corruption," Working Papers 2011.08, Fondazione Eni Enrico Mattei.
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-04 (All new papers)
- NEP-LTV-2010-12-04 (Unemployment, Inequality & Poverty)
- NEP-POL-2010-12-04 (Positive Political Economics)
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- Ivar Kolstad & Arne Wiig, 2011. "Does democracy reduce corruption?," CMI Working Papers 4, CMI (Chr. Michelsen Institute), Bergen, Norway.
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