A contribution to the empirics of press freedom and corruption

We test the relationship between aggregate press freedom and corruption performing a modified extreme bounds analysis. We also test the relation among different forms of restrictions to press freedom using previously unexplored disaggregated data. Our results support the theoretical view that restrictions to press freedom leads to higher corruption. Furthermore, we obtain that both political and economic influences on the media are strongly and robustly related to corruption, while detrimental laws and regulations influencing the media are not. In all cases the evidence indicates, although not conclusively, that the direction of causation runs from a freer press to lower corruption.     

Birds of a feather: Evidence on commonality of corruption and democracy in the origin and location of foreign investment in Russian regions

We examine the effects of subnational variations in corruption and democratization on the location decisions of foreign investors in Russian regions using firm-level panel data for the period 1996–2007. We link these effects to the level of corruption and type of political regime in the country of origin of a foreign investor. We find a relationship between attributes of foreign investors' home countries and attributes of the regions in which investment takes place: foreign investors from less corrupt and democratic countries tend to invest in less corrupt and more democratic Russian regions, whereas those from more corrupt and non-democratic countries tend to invest in more corrupt and less democratic regions. An inference is that, in Russian regions with high corruption and with autocratic government, foreign direct investment appears driven by the personal interests of controlling regional political elites who collaborate for mutual gain with foreign investors from corrupt and autocratic countries. Our results suggest a general conclusion that origin and location of foreign investment are linked by common political culture.     

The interaction effect of economic freedom and democracy on corruption: A panel cross-country analysis

This paper examines the effects of economic freedom, democracy and its interaction term on controlling corruption. Interactive results indicate that economic freedom and democracy significantly combat corruption. Economic freedom reduces corruption in any political environment. Democracy increases corruption when economic liberalization is low.     

The short-run and long-run effects of corruption control and political stability on forest cover

This article examines how governance, particularly corruption control and political stability, affects deforestation due to agricultural land expansion. We estimate the short-run and long-run effects of corruption control and political stability on deforestation in South American and Asian countries using data from 1990 to 2003 where converting forest land into agricultural land is a significant problem. Political stability has a positive and significant effect on forest cover in the short run but an insignificant effect in the long run. In contrast, corruption control has a negative and significant effect on forest cover in the short run and the long run with a larger magnitude in the former. One possible explanation is that corruption control induces more technological productivity and, if technology and land use are complements, increases in technological development lead to agricultural land expansion.     

Political contributions and corruption in the United States

The empirical evidence presented in this study indicates that political contributions and corruption are complements, rather than substitutes. Based on panel data for seven election cycles, regression results show that in the United States, political contributions and federal corruption convictions are positively correlated. Accordingly, we propose an alternative explanation for the relationship between political contributions and corruption: two components of a comprehensive strategy for rent-seeking. As long-term investments, political contributions influence legislators to change the rules of the game; as short-term investments, corruption influences public officials to sidestep the existing rules, in order to maximize the rent collected.     

ECONOMIC FREEDOM VERSUS POLITICAL FREEDOM: CROSS‐COUNTRY INFLUENCES ON CORRUPTION*

Using a well‐known index of corruption, this paper examines the determinants of corruption for a large sample of countries. Specifically, the present study brings empirical evidence to bear on the question of whether economic freedom or political freedom serves as a deterrent to corrupt activity. In particular, does greater economic freedom or greater political freedom yield a more ‘clean’ society? Our results show that greater economic freedom seems to matter more in this regard. Examining different components of economic freedom, we find that not all these components are equally effective in reducing corruption. For instance, monetary policy seems to have a stronger influence on the level of corrupt activity in a country than fiscal policy. Robustness of these findings is checked and policy implications are discussed.     

ACCOUNTABILITY AND CORRUPTION: POLITICAL INSTITUTIONS MATTER

This study uses a cross-country panel to examine the determinants of corruption, paying particular attention to political institutions that increase accountability. Even though the theoretical literature has stressed the importance of political institutions in determining corruption, the empirical literature is relatively scarce. Our results confirm the role of political institutions in determining the prevalence of corruption. Democracies, parliamentary systems, political stability, and freedom of press are all associated with lower corruption. Additionally, common results of the previous empirical literature, related to openness and legal tradition, do not hold once political variables are taken into account.     

Corruption and corporate leverage in an emerging economy: The role of economic freedom

This study investigated the effects of corruption and economic freedom on corporate leverage. We also evaluated how economic freedom shapes the effect of corruption on corporate leverage. Using a sample of Vietnamese firms covering a nine-year period from 2010 to 2018, we find evidence that increased control of corruption has a significant positive impact on firm leverage, whereas the opposite is true for economic freedom. This effect is robust to alternative measures of control of corruption as well as advanced estimation methods, such as firm-fixed effects and quantile regressions. Our results also reveal that the positive impact of corruption controls on corporate leverage is more pronounced for firms with high economic freedom. Econometrically, our findings indicate that firms with better control over corruption prefer debt financing, as demonstrated by their higher leverage ratio.     

Corruption and local democratization in Indonesia: The role of Islamic parties

Indonesia has a tradition of corruption among local officials who harass and collect bribes from firms. This paper examines whether corruption is affected by local democratization and by the party composition of local assemblies. Democratization occurred in 1999 and decentralization in 2001. We have firm-level data for 2001 and 2004. The 2001 data benchmark corruption at the time of decentralization. We find that corruption declines between 2001 and 2004 overall, but much less so in districts with more secular party as opposed to Islamic party representatives in district assemblies. For a larger sample of districts, correspondingly, we find that corruption in 2004 is more in districts which voted more in favor of secular party representatives in the first elections in 1999. We argue that the effects seem to be causal, over above any effects of changing religiosity and economic circumstances across districts.     

The sound of silence: Political accountability and libel law

This paper explores the role played by press regulation in selecting the information mass media deliver to voters. The focus is on whether press regulation can reduce political corruption and increase voters' welfare. By endogenizing the response of the voters to information from the media, we clarify under which circumstances regulation reduces or increases corruption. We show that punitive laws can reduce political corruption only if the moral hazard problem dominates adverse selection and the punishment is large enough to deter the publication of some well-founded scandals.     

Economic Reform and Corruption: Evidence from Panel Data

The notion that economic reform can reduce corruption remains prevalent in the policy agenda of international financial institutions, especially of the World Bank. Economic reforms have, therefore, been carried out throughout various parts of the world to improve the performance of the economies. Using data from 94 low‐ and middle‐income nations for the period 1996–2015, this study employs static and dynamic panel analysis to examine whether economic reform undertaken in accordance with the World Bank's reform programs negatively affects corruption. Our findings suggest that enhancing government effectiveness (i.e. independence of civil service from political pressure, provision of quality public services, effective policy formulation and the government's commitment to such policies) and improving public rights and civil liberties could be some of the most promising policies in terms of fighting corruption. The role of economic development and growth in real per capita income is also found to be significant in some of the specifications. However, the assertion that economic reform can reduce corruption is rejected in all the specifications. We rather find evidence that economic reforms negatively affect the ability of democracy to fight corruption, although on a slim margin. The central theme of the implications of our findings is that in combating corruption, social, institutional and legal means are far more important than economic means. The finding thus is compatible with the World Bank's effort in the later years to introduce governance and democracy as effective tool against corruption.     

The nexus between corruption and academic freedom: An international investigation of the underlying linkages

Studying a relatively under-researched aspect in economics, this paper examines the nexus between corruption and academic freedom. Our main hypothesis is that greater corruption undermines academic freedom and we test this hypothesis using data for 104 nations from 2012 to 2018. Our results support the main hypothesis, and this finding also generally holds across alternative aspects of academic freedom. Another contribution of this work lies in dissecting the direct and indirect (through corruption) effects of various drivers of academic freedom. Finally, additional insights are gained by considering different dimensions of academic freedom and how they are impacted by corruption.     

Corruption and the effects of economic freedom

The prediction that economic freedom is beneficial in reducing corruption has not been found to be universally robust in empirical studies. The present work reviews this relationship by using firms' data in a cross-country survey and argues that approaches using aggregated macro data have not been able to explain it appropriately. We model cross-country variations of the microfounded economic freedom–corruption relationship using multilevel models. Additionally, we analyse this relationship by disentangling the determinants for several components of economic freedom because not all areas affect corruption equally. The results show that the extent of the macro-effects on the measures of (micro)economic freedom for corruption, identified by the degree of economic development of a country, can explain why a lack of competition policies and government regulations may yield more corruption. Estimations for Africa and transition economy subsamples confirm our conjectures.     

The explosive combination of religious decentralization and autocracy

The relationship between religion and politics is explored from a theoretical standpoint. Religious clerics can be seduced by an autocrat and political stability is at stake. The autocrat's decisions consist of two measures both capable of antagonizing religious clerics: adopting secular reforms and unduly appropriating part of the national wealth, which generally are complements. Compared to centralized religions, decentralized religions, such as Islam, tend to discourage secular reforms and corruption but those effects are not guaranteed if the autocrat accepts political instability. The main hypotheses and the central results of the theory are illustrated with regime case studies that refer to contemporary times.     

Election cycles in mining licensing: theory and evidence from Albania

Most of the literature on political business and budgetary cycles (PBBC) has focused on fiscal and monetary policy variables in advanced-country contexts. We extend this literature by investigating political cycle effects in a non-monetary, non-fiscal policy regime (the allocation of mining licences) in a transition country context. We propose a model of mining licensing that allows for corruption and for both supply and demand effects to determine the outcome. We then estimate this model using time-series data from post-communist Albania. Relying on a dynamic Poisson model, we find evidence of both opportunistic and partisan effects. Based on our theory, we suggest a corruption interpretation of political cycles in non-fiscal/non-monetary variables. This interpretation, we suggest, may be more applicable to the context of developing and transition countries. Our study raises important questions about the unintended (and often pernicious) effects of transition politics on economic regulation and economic performance in post-socialist economies.     

The Role of the Judiciary in the Public Decision‐Making Process

Empirical work on the relationship between political corruption and the design of public institutions suggests that the structure of judiciaries is an important determinant of corruption. This study develops a simple political economic model to investigate the role of judicial oversight in the policy‐making process for corruption deterrence, focusing on two dimensions of quality of the judiciary, namely efficiency and integrity. Our analysis explicitly accounts for the possibility that, while being independent of the political authority, the judiciary itself may be vulnerable to pressure from special interests. We study endogenous policy‐making under complete information and provide general conditions for the existence of deterrence (zero‐bribe) equilibria. In particular we show that preserving the independence of judiciaries in corrupt societies proves crucial to the existence of corruption‐deterrence effects.     

Democracy,rent seeking,public spending and growth

Does democratization imply faster growth, less corruption and less inefficiency? Past studies yield ambiguous results on the effects of democracy on economic performance and growth. We develop a simple two-sector endogenous growth model that shows both very young and mature democracies grow faster than countries in mid stages of democratization, producing a ‘U’ effect. This effect results from the pattern of rent seeking as it diverts from the provision of public goods. Rent-seekers act as monopolistic competitors. Initially, more democracy increases their number, raising aggregate rents. However, rents per rent-seeker fall with the number of rent seekers. Due to this crowding effect and the increased competition among rent seekers, aggregate rents fall in mature democracies. Thus, rents show an ‘inverted-U’ effect in relation to democracy. We find fairly robust supportive evidence for the latter.     

Oligarchy, democracy, and state capacity

We develop a dynamic political economy model in which investment in the state capacity to levy taxes and deter crime is a policy variable, and we study the evolution of state capacity when policy is chosen by an elite. We show that democratization in the sense of expansion of the elite leads to an increased investment in state capacity and to a reduction in illegal activities and has nonmonotonic effects on tax rates as it reduces the willingness of the elite to engage in particularistic spending but enhances its willingness to provide public goods. Depending on initial conditions, consensual political changes may lead either to democratization or to the entrenchment of an immovable elite.     

The price of silence: Media competition,capture, and electoral accountability

Is competition in the mass media market an effective deterrent against media capture? Does it prevent political groups from influencing reporting? This paper shows that in some cases it does not. Building on the literature on media capture, the model highlights that, under fairly generic assumptions, high competition in the media market can drive the cost of media capture to zero, making capture easier. Moreover, it highlights conditions on the parameters where the effect of competition on capture is non-monotonic, i.e. capture may occur for levels of competition lower, but also higher, than those leading to media freedom.