Fiscal Decentralization: A Remedy for Corruption?
This paper examines the effect of fiscal decentralization in a country on the level of corruption. Using a tax competition framework with rent-seeking behavior, it is shown theoretically that fiscal decentralization, modeled as an increase in the number of competing jurisdictions, leads to a lower level of corruption. This result is then tested using a small, cross-country data set. The empirical results are not very strong, but they suggest that the hypothesized relationship between decentralization and corruption may indeed exist.
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Volume (Year): 11 (2004)
Issue (Month): 2 (03)
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- Huther, Jeff & Shah, Anwar, 1998. "Applying a simple measure of good governance to the debate on fiscal decentralization," Policy Research Working Paper Series 1894, The World Bank.
- International Monetary Fund, 1997. "Corruption and the Rate of Temptation; Do Low Wages in the Civil Service Cause Corruption?," IMF Working Papers 97/73, International Monetary Fund.
- Panizza, Ugo, 1999. "On the determinants of fiscal centralization: Theory and evidence," Journal of Public Economics, Elsevier, vol. 74(1), pages 97-139, October. Full references (including those not matched with items on IDEAS)
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