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Democracy, Property Rights, Income Equality, and Corruption

Author

Listed:
  • Bin Dong

    (The School of Economics and Finance, Queensland University of Technology)

  • Benno Torgler

    (The School of Economics and Finance, Queensland University of Technology, CREMA – Centre for Research in Economics, Management and the Arts and CESifo)

Abstract

This 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 rights 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.

Suggested Citation

  • Bin Dong & Benno Torgler, 2011. "Democracy, Property Rights, Income Equality, and Corruption," Working Papers 2011.08, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2011.08
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    Citations

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    Cited by:

    1. Forson, Joseph Ato & Baah-Ennumh, Theresa Yabaa & Buracom, Ponlapat & Chen, Guojin & Peng, Zhen, 2014. "Causes of Corruption: Evidence from Sub-Sahara Africa," MPRA Paper 102431, University Library of Munich, Germany, revised 20 Mar 2016.
    2. Jonathan P. Caulkins & Gustav Feichtinger & Dieter Grass & Richard F. Hartl & Peter M. Kort & Andreas J. Novak & Andrea Seidl & Franz Wirl, 2014. "A Dynamic Analysis of Schelling’s Binary Corruption Model: A Competitive Equilibrium Approach," Journal of Optimization Theory and Applications, Springer, vol. 161(2), pages 608-625, May.
    3. Luigi Aldieri & Gennaro Guida & Maxim Kotsemir & Concetto Paolo Vinci, 2019. "An investigation of impact of research collaboration on academic performance in Italy," Quality & Quantity: International Journal of Methodology, Springer, vol. 53(4), pages 2003-2040, July.
    4. Franklin Obeng-Odoom, 2012. "Review Article," Urban Studies, Urban Studies Journal Limited, vol. 49(1), pages 219-224, January.
    5. Berggren, Niclas & Bjørnskov, Christian, 2020. "Corruption, judicial accountability and inequality: Unfair procedures may benefit the worst-off," Journal of Economic Behavior & Organization, Elsevier, vol. 170(C), pages 341-354.
    6. Eugen Dimant & Guglielmo Tosato, 2018. "Causes And Effects Of Corruption: What Has Past Decade'S Empirical Research Taught Us? A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 32(2), pages 335-356, April.
    7. Jonas Gamso & Robert Grosse, 2021. "Trade agreement depth, foreign direct investment, and the moderating role of property rights," Journal of International Business Policy, Palgrave Macmillan, vol. 4(2), pages 308-325, June.
    8. Ivar Kolstad & Arne Wiig, 2011. "Does democracy reduce corruption?," CMI Working Papers 4, CMI (Chr. Michelsen Institute), Bergen, Norway.

    More about this item

    Keywords

    Corruption; Democracy; Income inequality; Property rights;
    All these keywords.

    JEL classification:

    • 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 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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