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Governmental decentralization and corruption revisited: Accounting for potential endogeneity

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  • Choudhury, Sanchari

Abstract

The causal effect of governmental decentralization on firm-level corruption is inconclusive due to the difficulty in obtaining a traditional instrumental variable. Circumventing the issue by using the Lewbel (2012) identification strategy, we find mild evidence of political decentralization being endogenous but no support for fiscal decentralization being endogenous.

Suggested Citation

  • Choudhury, Sanchari, 2015. "Governmental decentralization and corruption revisited: Accounting for potential endogeneity," Economics Letters, Elsevier, vol. 136(C), pages 218-222.
    • Handle: RePEc:eee:ecolet:v:136:y:2015:i:c:p:218-222
    DOI: 10.1016/j.econlet.2015.09.040
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    References listed on IDEAS

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    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    2. Arthur Lewbel, 2012. "Using Heteroscedasticity to Identify and Estimate Mismeasured and Endogenous Regressor Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(1), pages 67-80.
    3. Razafindrakoto, Mireille & Roubaud, François, 2010. "Are International Databases on Corruption Reliable? A Comparison of Expert Opinion Surveys and Household Surveys in Sub-Saharan Africa," World Development, Elsevier, vol. 38(8), pages 1057-1069, August.
    4. Thanh Thuy Vu & Messaoud Zouikri & Bruno Deffains, 2014. "The Interrelationship between Formal and Informal Decentralization and Its Impact on Subcentral Governance Performance: the Case of Vietnam," CESifo Economic Studies, CESifo Group, vol. 60(3), pages 613-652.
    5. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922, October.
    6. Grossman, Guy & Lewis, Janet I., 2014. "Administrative Unit Proliferation," American Political Science Review, Cambridge University Press, vol. 108(1), pages 196-217, February.
    7. Fan, C. Simon & Lin, Chen & Treisman, Daniel, 2009. "Political decentralization and corruption: Evidence from around the world," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 14-34, February.
    8. Dilyan Donchev & Gergely Ujhelyi, 2014. "What Do Corruption Indices Measure?," Economics and Politics, Wiley Blackwell, vol. 26(2), pages 309-331, July.
    9. Maksym Ivanyna & Anwar Shah, 2011. "Decentralization and Corruption: New Cross-Country Evidence," Environment and Planning C, , vol. 29(2), pages 344-362, April.
    10. Cai, Hongbin & Treisman, Daniel, 2004. "State corroding federalism," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 819-843, March.
    11. repec:dau:papers:123456789/4352 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Sanchari Choudhury, 2021. "Regulation and Corruption: Evidence from the United States," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(4), pages 897-934, August.
    2. Timothy Tyler Brown & Vishnu Murthy, 2020. "Do public health activities pay for themselves? The effect of county‐level public health expenditures on county‐level public assistance medical care benefits in California," Health Economics, John Wiley & Sons, Ltd., vol. 29(10), pages 1220-1230, October.
    3. François, Abel & Méon, Pierre-Guillaume, 2021. "Politicians at higher levels of government are perceived as more corrupt," European Journal of Political Economy, Elsevier, vol. 67(C).
    4. Kassouri, Yacouba, 2022. "Fiscal decentralization and public budgets for energy RD&D: A race to the bottom?," Energy Policy, Elsevier, vol. 161(C).
    5. Choudhury, Sanchari, 2023. "Non-random selection into entrepreneurship in the realm of government decentralization and corruption," European Journal of Political Economy, Elsevier, vol. 78(C).
    6. Choudhury, Sanchari, 2023. "The causal effect of regulation on income inequality across the U.S. states," European Journal of Political Economy, Elsevier, vol. 80(C).
    7. Choudhury, Sanchari, 2019. "WTO membership and corruption," European Journal of Political Economy, Elsevier, vol. 60(C).

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    More about this item

    Keywords

    Corruption; Decentralization; Endogeneity; Heteroskedasticity; Instrumental variables;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H10 - Public Economics - - Structure and Scope of Government - - - General

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