Why Big Government is Good Government

28 Pages Posted: 1 Aug 2011 Last revised: 31 Aug 2011

See all articles by Anna Persson

Anna Persson

University of Gothenburg

Bo Rothstein

University of Gothenburg

Date Written: 2011

Abstract

This paper asks how we can understand the fact that – quite contrary to what dominant economic theories of corruption predict – bigger governments generally tend to be less corrupt than smaller ones. The results, based on an interview study conducted in Uganda, reveal that the unexpected, comparatively high levels of corruption in countries with relatively small governments can at least partly be understood as a consequence of that the size of government does not only affect the opportunities and incentives for so-called agents to engage in corrupt activities, but it also affects the incentives for so-called principals to actually hold corrupt officials accountable. In particular, the study reveals that the level of direct taxation – which is a key indicator of the size of government, smaller governments generally having lower levels of direct taxation than larger governments – seems to play a decisive role in shaping the incentives for ordinary citizens to hold corrupt officials accountable, low levels of direct taxation leading to a significantly decreased sense of “ownership” of the state, and consequently a decreased demand for “good government” on behalf of citizens. Since, in the end, the existence of “principals”, willing to hold public officials accountable, is fundamental for successfully constraining corruption, the lack of such principals in states with smaller governments can to a significant extent explain why bigger governments are often also better governments.

Suggested Citation

Persson, Anna and Rothstein, Bo, Why Big Government is Good Government (2011). APSA 2011 Annual Meeting Paper, Available at SSRN: https://ssrn.com/abstract=1902612

Anna Persson (Contact Author)

University of Gothenburg ( email )

Box 711
Göteborg, 405 30
Sweden

Bo Rothstein

University of Gothenburg ( email )

Box 711
Gothenburg, SE 40530
Sweden
+46317864599 (Fax)

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