Federalism, decentralisation and corruption
AbstractWe 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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 27535.
Date of creation: Jun 2007
Date of revision:
Fiscal decentralisation; Corruption; Federalism; Unitarism; Political Institutions;
Find related papers by JEL classification:
- H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
- H10 - Public Economics - - Structure and Scope of Government - - - General
- H40 - Public Economics - - Publicly Provided Goods - - - General
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
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