Does democracy reduce corruption?
While democracy is commonly believed to reduce corruption, there are obvious endogeneity problems in measuring the impact of democracy on corruption. This paper addresses the endogeneity of democracy by exploiting the common observation that democracies seldom go to war against each other. We instrument for democracy using a dummy variable reflecting whether a country has been at war with a democracy in the period 1946-2009, while controlling for the extent to which countries have been at war in general. We find that democracy to a significant extent reduces corruption, and the effect is considerably larger than suggested by estimations not taking endogeneity into account. Democracy is hence more important in combating corruption than previous studies would suggest.
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- Bin Dong & Benno Torgler, 2010.
"Democracy, Property Rights, Income Equality, and Corruption,"
CREMA Working Paper Series
2010-23, Center for Research in Economics, Management and the Arts (CREMA).
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- Bin Dong & Benno Torgler, 2010. "Democracy, Property Rights, Income Equalilty, and Corruption," School of Economics and Finance Discussion Papers and Working Papers Series 262, School of Economics and Finance, Queensland University of Technology.
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- Andrei Shleifer & Robert W. Vishny, 1998. "The Quality of Government," Harvard Institute of Economic Research Working Papers 1847, Harvard - Institute of Economic Research.
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- Mehmet Bac, 2001.
"Corruption, Connections and Transparency: Does a Better Screen Imply a Better Scene?,"
Springer, vol. 107(1), pages 87-96, April.
- Bac, Mehmet, 2001. " Corruption, Connections and Transparency: Does a Better Screen Imply a Better Scene?," Public Choice, Springer, vol. 107(1-2), pages 87-96, April.
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