The Effect of Fiscal Decentralization on Corruption: A Non‐linear Hypothesis

Maria Rosaria Alfano, Anna Laura Baraldi () and Claudia Cantabene

German Economic Review, 2019, vol. 20, issue 1, 105-128

Abstract: This study advances the literature on the effect of decentralization on corruption by proposing a theoretical motivation for the hypothesis that the corruption‐minimizing decentralization arrangement prescribes intermediate decentralization degrees: a ‘middle’ decision‐making power of local governors may mitigate the tradeoff between the rent‐seeking incentive for local politicians and the effectiveness of their voters’ monitoring. The estimation of a non‐linear empirical model strongly confirms that a decentralization degree between 15% and 21% minimizes corruption even through different estimation procedures, introduction of control variables and the use of internal and external IV and of alternative decentralization and corruption measurements.

Date: 2019
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https://doi.org/10.1111/geer.12164

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Journal Article: The Effect of Fiscal Decentralization on Corruption: A Non-linear Hypothesis (2019)
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