Localization and Corruption: Panacea or Pandora's Box?

39 Pages Posted: 13 Jan 2005

See all articles by Tugrul Gurgur

Tugrul Gurgur

Central Bank of the Republic of Turkey

Anwar Shah

World Bank

Date Written: January 2005


An extensive literature on the relationship between decentralization (or localization) and corruption has developed in recent years. While some authors argue that there is a positive relationship between decentralization and corruption, others claim that decentralization in fact leads to a reduction in the level of corruption. This important policy question has not yet been laid to rest since previous empirical work simply uses eclectic regressions and lacks a conceptual framework to discover the root causes of corruption. Gurgur and Shah attempt to fill this void by presenting a framework in identifying the drivers of corruption both conceptually and empirically to isolate the role of centralized decisionmaking on corruption. The following results emerge:

- For a sample of 30 countries (developing and industrial), corruption is caused by a lack of service orientation in the public sector, weak democratic institutions, economic isolation (closed economy), colonial past, internal bureaucratic controls, and centralized decisionmaking.

- Decentralization is found to have a negative impact on corruption, with the effect being stronger in unitary than in federal countries.

This paper - a product of the Poverty Reduction and Economic Management Division, World Bank Institute - is part of a larger effort in the institute to exchange ideas on the reform of public sector governance.

Keywords: Governance, Public Sector Management

Suggested Citation

Gurgur, Tugrul and Shah, Anwar, Localization and Corruption: Panacea or Pandora's Box? (January 2005). World Bank Policy Research Working Paper No. 3486. Available at SSRN: https://ssrn.com/abstract=648011

Tugrul Gurgur (Contact Author)

Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050

Anwar Shah

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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