A study on the relationship between corruption and government size: the role of democracy

Go Kotera, Keisuke Okada and Sovannroeun Samreth

MPRA Paper from University Library of Munich, Germany

Abstract: Previous studies on the effect of government size on corruption have produced mixed results. For the purpose of explaining these ambiguous results, our study investigates the effect of government size on corruption by taking into account the role of democracy level in each country. Using annual data from 82 countries from 1995 to 2008, the estimation results indicate that an increase in government size can lead to a decrease in corruption if democracy level is sufficiently high and, in contrast, can lead to an increase in corruption if it is too low. As a robustness check, estimations using a different index of corruption and a different proxy for government size are also conducted. The results show that our main results are robust. Furthermore, to deal with endogeneity problems, we conduct an instrumental variable estimation, the results of which support our main results. These findings provide some important implications for policymakers seeking to conduct government intervention without aggravating corruption.

Keywords: Corruption; Government Size; Democracy; Instrumental Variable Estimation (search for similar items in EconPapers)
JEL-codes: D73 H11 H50 (search for similar items in EconPapers)
Date: 2010-09-15
New Economics Papers: this item is included in nep-cdm and nep-pol
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:25015

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