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Government size, democracy, and corruption: An empirical investigation


  • Kotera, Go
  • Okada, Keisuke
  • Samreth, Sovannroeun


Previous studies on the effect of government size on corruption have produced mixed results. In an attempt to explain these ambiguous results, this study investigates the effect of government size on corruption by taking into account the role of the democracy in each country. Using annual data of 82 countries between 1995 and 2008, the estimation results indicate that an increase in government size can lead to a decrease in corruption if the democracy level is sufficiently high and, in contrast, can lead to an increase in corruption if it is too low. As robustness checks, the estimations using a different index of corruption and a different proxy for government size are also conducted. The results reveal that our main findings are robust. Furthermore, to address endogeneity problems, we conduct the instrumental variables estimation and the system generalized method of moments estimation, the results of which also support our primary findings. These results provide some important implications for policymakers seeking to perform government interventions without aggravating corruption.

Suggested Citation

  • Kotera, Go & Okada, Keisuke & Samreth, Sovannroeun, 2012. "Government size, democracy, and corruption: An empirical investigation," Economic Modelling, Elsevier, vol. 29(6), pages 2340-2348.
  • Handle: RePEc:eee:ecmode:v:29:y:2012:i:6:p:2340-2348 DOI: 10.1016/j.econmod.2012.06.022

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    References listed on IDEAS

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    Cited by:

    1. Goel, Rajeev K. & Mazhar, Ummad & Nelson, Michael A. & Ram, Rati, 2017. "Different forms of decentralization and their impact on government performance: Micro-level evidence from 113 countries," Economic Modelling, Elsevier, vol. 62(C), pages 171-183.
    2. Yongzheng Liu & Haibo Feng, 2015. "Tax structure and corruption: cross-country evidence," Public Choice, Springer, vol. 162(1), pages 57-78, January.
    3. Dimant, Eugen, 2014. "The Antecedents and Effects of Corruption - A Reassessment of Current (Empirical) Findings," MPRA Paper 60947, University Library of Munich, Germany.
    4. repec:eee:ecmode:v:68:y:2018:i:c:p:205-216 is not listed on IDEAS
    5. repec:eee:ecanpo:v:54:y:2017:i:c:p:83-95 is not listed on IDEAS
    6. Nedra Baklouti & Younes Boujelbene, 2015. "Exploring the Relationship between Democracy, Corruption and Economic Growth in MENA countries," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(3), pages 43-58, June.
    7. Joscha Beckmann & Marek Endrichs & Rainer Schweickert, 2016. "Government activity and economic growth – one size fits All?," International Economics and Economic Policy, Springer, vol. 13(3), pages 429-450, July.
    8. Fidel Perez-Sebastian & Ohad Raveh, 2013. "The natural Resource Curse, Fiscal Decentralization, and Agglomeration Economies," OxCarre Working Papers 112, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    9. Chen, Minghua & Jeon, Bang Nam & Wang, Rui & Wu, Ji, 2015. "Corruption and bank risk-taking: Evidence from emerging economies," Emerging Markets Review, Elsevier, vol. 24(C), pages 122-148.
    10. repec:kap:pubcho:v:172:y:2017:i:3:d:10.1007_s11127-017-0458-4 is not listed on IDEAS
    11. Rajeev K. Goel & James W. Saunoris, 2016. "Military Buildups, Economic Development and Corruption," Manchester School, University of Manchester, vol. 84(6), pages 697-722, December.

    More about this item


    Government size; Democracy; Corruption;

    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
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General


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