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Public Sector Size and Corruption: Evidence from 290 Swedish Municipalities

Author

Listed:
  • Bergh, Andreas

    () (Research Institute of Industrial Economics (IFN))

  • Fink, Günther

    (Harvard School of Public Health)

  • Öhrvall, Richard

    (Linnaeus University)

Abstract

In this paper, we use data from a corruption survey conducted among top politicians and high level civil servants in 290 Swedish municipalities in 2007 to investigate the effects of government size on corruption. We construct several measures of corruption based on the survey, and combine these corruption measures with detailed administrative municipality level data to estimate the effect of local government resources on corruption. In cross-sectional analysis, we find a robust and negative association between total public expenditure and corruption. When we use lagged population growth rates and age structure as instruments for expenditure in 2-stage-least-squares regressions, the point estimates remain negative, but are no longer significant. In contrast with standard political economy models, where a bigger public sector is typically assumed to cause problems with corruption and public office abuse, our results suggest that corruption pressures may be particularly high when government resources are limited.

Suggested Citation

  • Bergh, Andreas & Fink, Günther & Öhrvall, Richard, 2012. "Public Sector Size and Corruption: Evidence from 290 Swedish Municipalities," Working Paper Series 938, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0938
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    References listed on IDEAS

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    1. Joshua D. Angrist & Alan B. Krueger, 2001. "Instrumental Variables and the Search for Identification: From Supply and Demand to Natural Experiments," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 69-85, Fall.
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    3. Alberto Alesina & George-Marios Angeletos, 2005. "Fairness and Redistribution," American Economic Review, American Economic Association, pages 960-980.
    4. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    5. Thierry Verdier & Daron Acemoglu, 2000. "The Choice between Market Failures and Corruption," American Economic Review, American Economic Association, vol. 90(1), pages 194-211, March.
    6. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753, December.
    7. Lorenzo Pellegrini & Reyer Gerlagh, 2008. "Causes of corruption: a survey of cross-country analyses and extended results," Economics of Governance, Springer, vol. 9(3), pages 245-263, July.
    8. repec:hrv:faseco:30747160 is not listed on IDEAS
    9. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
    10. Rajeev Goel & Michael Nelson, 2011. "Measures of corruption and determinants of US corruption," Economics of Governance, Springer, vol. 12(2), pages 155-176, June.
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    More about this item

    Keywords

    Corruption; Government size; Local politi;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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