Government Fragmentation versus Fiscal Decentralization and Corruption

Abstract

This research examines the influence of government decentralization on corruption in the United States. Previous research has focused primarily on fiscal decentralization. We address whether the structure of local governments — measured in terms of the scope of services offered and the population served — has a bearing on corruption. Results show that government decentralization does not necessarily reduce corruption — the type of decentralization matters. Specifically, more general-purpose governments contribute to corruption. In contrast, the effect of special-purpose governments is mixed. The findings uniquely reveal the tension between fiscal decentralization and fragmented local governments in terms of impacts on corruption.

Keywords: Corruption; Fiscal decentralization; Local government fragmentation; Special-purpose government; General-purpose government

JEL Classification: H73; H11