Fiscal Decentralization: A Remedy for Corruption? |
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Authors: | G. Gulsun Arikan |
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Affiliation: | (1) Department of Economics, University of Illinois at Urbana-Champaign, 1206 South Sixth St., Champaign, IL 61820, USA |
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Abstract: | This paper examines the effect of fiscal decentralization in a country on the level of corruption. Using a tax competition framework with rent-seeking behavior, it is shown theoretically that fiscal decentralization, modeled as an increase in the number of competing jurisdictions, leads to a lower level of corruption. This result is then tested using a small, cross-country data set. The empirical results are not very strong, but they suggest that the hypothesized relationship between decentralization and corruption may indeed exist. |
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Keywords: | corruption fiscal decentralization tax competition |
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