The effect of democracy on corruption: income is key

Michael Jetter; Alejandra Montoya Agudelo; Andrés Ramírez Hassan

doi:10.1016/j.worlddev.2015.05.016

The effect of democracy on corruption: income is key

Michael Jetter, Alejandra Montoya Agudelo, Andrés Ramírez Hassan

Research output: Contribution to journal › Article › Research › peer-review

68 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 language	English
Pages (from-to)	286-304
Number of pages	19
Journal	World Development
Volume	74
DOIs	https://doi.org/10.1016/j.worlddev.2015.05.016
Publication status	Published - Oct 2015
Externally published	Yes

Keywords

Corruption
Democracy
Income levels
Panel data
Regime type

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.worlddev.2015.05.016

Cite this

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AB - 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.

KW - Corruption

KW - Democracy

KW - Income levels

KW - Panel data

KW - Regime type

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VL - 74

SP - 286

EP - 304

JO - World Development

JF - World Development

ER -

The effect of democracy on corruption: income is key

Abstract

Keywords

UN SDGs

Access to Document

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