The effect of democracy on corruption: income is key

Michael Jetter, Alejandra Montoya Agudelo, Andrés Ramírez Hassan

Research output: Contribution to journalArticleResearchpeer-review

34 Citations (Scopus)

Abstract

This paper provides an explanation for the ambiguous relationship between democracy and corruption. Using rich panel data with annual observations from 1998 to 2012 allows us to control not only for country- and time-invariant factors but also for potential reverse causality between corruption and income levels in a 3SLS framework. Democracy reduces corruption but only in economies that have already crossed a GDP/capita level of approximately US$2,000 (in 2005 US$). For poorer nations, democratization is suggested to increase corruption. Other institutional characteristics are unlikely to drive this result and findings are robust to a variety of robustness checks and quantile regressions.

Original languageEnglish
Pages (from-to)286-304
Number of pages19
JournalWorld Development
Volume74
DOIs
Publication statusPublished - Oct 2015
Externally publishedYes

Keywords

  • Corruption
  • Democracy
  • Income levels
  • Panel data
  • Regime type

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