Localization and corruption: panacea or pandora's box?

Tugrul Gurgur () and Anwar Shah

No 581, CEMA Working Papers from China Economics and Management Academy, Central University of Finance and Economics

Abstract: An extensive literature on the relationship between decentralization (or localization) and corruption has developed in recent years. While some authors argue that there is a positive relationship between decentralization and corruption, others claim that decentralization in fact leads to a reduction in the level of corruption. This important policy question has not yet been laid to rest, since previous empirical work simply uses eclectic regressions and lacks a conceptual framework to discover the root causes of corruption. This paper attempts to fill this void by presenting a framework in identifying the drivers of corruption both conceptually and empirically in order to isolate the role of centralized decision-making on corruption. The following results emerge: 1) For a sample of 30 countries (developing and industrial), corruption is caused by: a lack of service-orientation in the public sector, weak democratic institutions, economic isolation (closed economy), colonial past, internal bureaucratic controls and centralized decision making. 2) Decentralization is found to have a negative impact on corruption, with the effect being stronger in unitary than in federal countries.

Pages: 39 pages
Date: 2008
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Citations: View citations in EconPapers (27)

Published in Annals of Economics and Finance, May 2014, pages 109-136.
Published in Policy Research Working Paper Series with number 3486.

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Related works:
Journal Article: Localization and corruption: panacea or pandora's box? (2014)
Working Paper: Localization and corruption: panacea or pandora's box? (2005)
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