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Federalism, decentralisation and corruption

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  • Freille, Sebastian
  • Haque, Mohammad Emranul
  • Kneller, Richard Anthony

Abstract

We investigate the empirical relationship between decentralisation and corruption. Using a newly assembled dataset containing data for up to 174 countries, we revisit the empirical evidence and seek to explain some of the inconsistent results that exist in the literature. We find that not only results differ due to the use of different specifications and data but more importantly because previous research overlooks the relationship between different dimensions of decentralisation. We propose an approach aimed at exploring the aggregate effect of decentralization on corruption. In this context, we analyze the existence of direct and indirect effects of these aspects on corruption. Our results suggest that fiscal (market) decentralisation is associated with lower corruption. However, we also find that constitutional decentralisation (federalism) is associated with higher corruption. Furthermore, we find that certain forms of political decentralisation worsen the positive effect of constitutional centralization on corruption. Finally, other forms of decentralisation such as spatial decentralisation do not appear to have a strong association with corruption. Our results suggest the possibility that previous empirical work may grossly overestimate de aggregate impact of decentralization and corruption.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27535.

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Date of creation: Jun 2007
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Handle: RePEc:pra:mprapa:27535

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Related research

Keywords: Fiscal decentralisation; Corruption; Federalism; Unitarism; Political Institutions;

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References

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  1. Fisman, Raymond & Gatti, Roberta, 2000. "Decentralization and corruption - evidence across countries," Policy Research Working Paper Series 2290, The World Bank.
  2. Enikolopov, Ruben & Zhuravskaya, Ekaterina, 2007. "Decentralization and political institutions," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2261-2290, December.
  3. Chowdhury, Shyamal K., 2004. "The effect of democracy and press freedom on corruption: an empirical test," Economics Letters, Elsevier, vol. 85(1), pages 93-101, October.
  4. Ari Kuncoro, 2004. "Bribery in Indonesia: some evidence from micro-level data," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(3), pages 329-354.
  5. Torsten Persson & Guido Tabellini & Francesco Trebbi, 2001. "Electoral Rules and Corruption," NBER Working Papers 8154, National Bureau of Economic Research, Inc.
  6. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
  7. Brunetti, Aymo & Weder, Beatrice, 2003. "A free press is bad news for corruption," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1801-1824, August.
  8. International Monetary Fund, 2001. "Fiscal Decentralization and Governance," IMF Working Papers 01/71, International Monetary Fund.
  9. Danila Serra, 2005. "Empirical determinants of corruption: A sensitivity analysis," Economics Series Working Papers GPRG-WPS-012, University of Oxford, Department of Economics.
  10. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  11. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
  12. Ebel, Robert D. & Yilmaz, Serdar, 2002. "On the measurement and impact of fiscal decentralization," Policy Research Working Paper Series 2809, The World Bank.
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Citations

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Cited by:
  1. Christian Lessmann & Gunther Markwardt, 2009. "One Size Fits All? Decentralization, Corruption, and the Monitoring of Bureaucrats," CESifo Working Paper Series 2662, CESifo Group Munich.
  2. Liliana Proskuryakova & Gulnara Abdrakhmanova & Hans Pitlik, 2013. "Public sector e-innovations. E-government and its impact on corruption," HSE Working papers WP BRP 04/STI/2013, National Research University Higher School of Economics.
  3. Kodila Tedika, Oasis, 2012. "Empirical Survey on the Causes of the Corruption
    [Aperçu empirique sur les causes de la corruption]
    ," MPRA Paper 41484, University Library of Munich, Germany.
  4. Stefan Voigt & Lorenz Blume, 2009. "The Economic Effects of Federalism and Decentralization – A Cross-Country Assessment," MAGKS Papers on Economics 200905, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  5. Marcel Gérard & Fernando M.M. Ruiz, 2009. "Corporate Taxation and the Impact of Governance, Political and Economic Factors," CESifo Working Paper Series 2904, CESifo Group Munich.

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