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

Alfano Maria Rosaria, Baraldi Anna Laura and Claudia Cantabene
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Alfano Maria Rosaria: Dipartimento di Economia, Università della Campania L. Vanvitelli,Caserta CE, Italy
Baraldi Anna Laura: Dipartimento di Economia, Università della Campania L. Vanvitelli,Caserta CE, Italy

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 corruptionminimizing 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.

Keywords: Corruption; fiscal decentralization; panel data; IV estimations (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1111/geer.12164

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