Does Rapid Liberalization Increase Corruption?

Samia Costa Tavares

Public Economics from EconWPA

Abstract: Corruption scandals seem to abound in countries that have recently undergone reform. Despite the proliferation of stories in the news media, no one has examined whether reform—be it democratization or economic liberalization or both—actually causes an increase in corruption. Theory provides no guidance as to the direction of causality—on the one hand, reforms make politicians accountable to voters, as well as introduce more competition, which should decrease corruption. On the other hand, the need for politicians to now raise campaign funds, as well as the increased availability of rents that results from economic liberalization provides for an incentive for corruption. This paper uses the numerous cases of democratizations and economic liberalizations that occurred in the 80s and 90s to examine this issue. The paper finds that undertaking both reforms in rapid succession actually leads to a decrease in corruption, while countries that democratized more than 5 years after liberalizing experienced an increase in corruption.

Keywords: corruption; liberalization; government; democracy (search for similar items in EconPapers)
JEL-codes: D72 D73 H11 H77 K42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-law, nep-pbe, nep-pol and nep-reg
Date: 2005-07-06, Revised 2005-08-31
Note: Type of Document - pdf
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwppe:0507003

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