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Federalism, decentralisation and corruption

Author

Listed:
  • Freille, Sebastian
  • Haque, Mohammad Emranul
  • Kneller, Richard Anthony

Abstract

We investigate the empirical relationship between decentralisation and corruption. Using a newly assembled dataset containing data for up to 174 countries, we revisit the empirical evidence and seek to explain some of the inconsistent results that exist in the literature. We find that not only results differ due to the use of different specifications and data but more importantly because previous research overlooks the relationship between different dimensions of decentralisation. We propose an approach aimed at exploring the aggregate effect of decentralization on corruption. In this context, we analyze the existence of direct and indirect effects of these aspects on corruption. Our results suggest that fiscal (market) decentralisation is associated with lower corruption. However, we also find that constitutional decentralisation (federalism) is associated with higher corruption. Furthermore, we find that certain forms of political decentralisation worsen the positive effect of constitutional centralization on corruption. Finally, other forms of decentralisation such as spatial decentralisation do not appear to have a strong association with corruption. Our results suggest the possibility that previous empirical work may grossly overestimate de aggregate impact of decentralization and corruption.

Suggested Citation

  • Freille, Sebastian & Haque, Mohammad Emranul & Kneller, Richard Anthony, 2007. "Federalism, decentralisation and corruption," MPRA Paper 27535, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:27535
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    File URL: https://mpra.ub.uni-muenchen.de/27535/1/MPRA_paper_27535.pdf
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    References listed on IDEAS

    as
    1. Brunetti, Aymo & Weder, Beatrice, 2003. "A free press is bad news for corruption," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1801-1824, August.
    2. Torsten Persson & Guido Tabellini & Francesco Trebbi, 2003. "Electoral Rules and Corruption," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 958-989, June.
    3. Ari Kuncoro, 2004. "Bribery in Indonesia: some evidence from micro-level data," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 40(3), pages 329-354.
    4. Enikolopov, Ruben & Zhuravskaya, Ekaterina, 2007. "Decentralization and political institutions," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2261-2290, December.
    5. repec:cup:apsrev:v:99:y:2005:i:04:p:567-581_05 is not listed on IDEAS
    6. Fisman, Raymond & Gatti, Roberta, 2002. "Decentralization and corruption: evidence across countries," Journal of Public Economics, Elsevier, vol. 83(3), pages 325-345, March.
    7. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
    8. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
    9. Chowdhury, Shyamal K., 2004. "The effect of democracy and press freedom on corruption: an empirical test," Economics Letters, Elsevier, vol. 85(1), pages 93-101, October.
    10. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    11. repec:wbk:wbpubs:28198 is not listed on IDEAS
    12. Ebel, Robert D. & Yilmaz, Serdar, 2002. "On the measurement and impact of fiscal decentralization," Policy Research Working Paper Series 2809, The World Bank.
    13. Danila Serra, 2006. "Empirical determinants of corruption: A sensitivity analysis," Public Choice, Springer, vol. 126(1), pages 225-256, January.
    14. International Monetary Fund, 2001. "Fiscal Decentralization and Governance; A Cross-Country Analysis," IMF Working Papers 01/71, International Monetary Fund.
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    Citations

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    Cited by:

    1. Kodila Tedika, Oasis, 2012. "Empirical Survey on the Causes of the Corruption
      [Aperçu empirique sur les causes de la corruption]
      ," MPRA Paper 41484, University Library of Munich, Germany.
    2. Marcel Gérard & Fernando M.M. Ruiz, 2009. "Corporate Taxation and the Impact of Governance, Political and Economic Factors," CESifo Working Paper Series 2904, CESifo Group Munich.
    3. Liliana Proskuryakova & Gulnara Abdrakhmanova & Hans Pitlik, 2013. "Public sector e-innovations. E-government and its impact on corruption," HSE Working papers WP BRP 04/STI/2013, National Research University Higher School of Economics.
    4. Stefan Voigt & Lorenz Blume, 2012. "The economic effects of federalism and decentralization—a cross-country assessment," Public Choice, Springer, vol. 151(1), pages 229-254, April.
    5. Lessmann, Christian & Markwardt, Gunther, 2010. "One Size Fits All? Decentralization, Corruption, and the Monitoring of Bureaucrats," World Development, Elsevier, vol. 38(4), pages 631-646, April.

    More about this item

    Keywords

    Fiscal decentralisation; Corruption; Federalism; Unitarism; Political Institutions;

    JEL classification:

    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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