Federalism, Decentralisation and Corruption

40 Pages Posted: 1 Jul 2007

See all articles by Sebastian Freille

Sebastian Freille

Universidad Católica de Córdoba; Universidad Nacional de Córdoba - Department of Economics

M. Emranul Haque

University of Nottingham

Richard Kneller

University of Nottingham

Date Written: June 2007

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 the inconsistent results that exist in the relevant 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 where more than one dimension of decentralisation enter the econometric model simultaneously. In this context, we analyze the existence of direct and indirect effects of these aspects on corruption. Our results suggest that both fiscal decentralisation and constitutional centralisation (unitarism) are simultaneously associated to lower corruption. Furthermore, we find that certain forms of political decentralisation (local elections) worsen the positive effect of constitutional centralisation on corruption. Finally, other forms of decentralisation such as structural decentralisation do not appear to have a strong association to corruption. We also test our results for robustness to different indicators and specification.

Keywords: Fiscal decentralisation, Corruption, Federalism, Political institutions

JEL Classification: H10, H40, H70, O10

Suggested Citation

Freille, Sebastian and Haque, Mohammad Emranul and Kneller, Richard, Federalism, Decentralisation and Corruption (June 2007). Available at SSRN: https://ssrn.com/abstract=951110 or http://dx.doi.org/10.2139/ssrn.951110

Sebastian Freille (Contact Author)

Universidad Católica de Córdoba ( email )

Av. Armada Argentina 3550
Córdoba, AR Córdoba 5010
Argentina

Universidad Nacional de Córdoba - Department of Economics

Avenida Valparaiso s / n
Ciudad Universitaria
Córdoba
Argentina

Mohammad Emranul Haque

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Richard Kneller

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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