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A study on the relationship between corruption and government size: the role of democracy

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  • Kotera, Go
  • Okada, Keisuke
  • Samreth, Sovannroeun

Abstract

Previous studies on the effect of government size on corruption have produced mixed results. For the purpose of explaining these ambiguous results, our study investigates the effect of government size on corruption by taking into account the role of democracy level in each country. Using annual data from 82 countries from 1995 to 2008, the estimation results indicate that an increase in government size can lead to a decrease in corruption if democracy level is sufficiently high and, in contrast, can lead to an increase in corruption if it is too low. As a robustness check, estimations using a different index of corruption and a different proxy for government size are also conducted. The results show that our main results are robust. Furthermore, to deal with endogeneity problems, we conduct an instrumental variable estimation, the results of which support our main results. These findings provide some important implications for policymakers seeking to conduct government intervention without aggravating corruption.

Suggested Citation

  • Kotera, Go & Okada, Keisuke & Samreth, Sovannroeun, 2010. "A study on the relationship between corruption and government size: the role of democracy," MPRA Paper 25015, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25015
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    References listed on IDEAS

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    Cited by:

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    2. Masoome Fouladi & Hedieh Setayesh & Yazdan Goudarzi-Farahani, 2014. "Factors influencing the formation of corruption in oil-rich countries," 2nd International Conference on Energy, Regional Integration and Socio-Economic Development 7689, EcoMod.
    3. Graziella Bonanno & Lucia Errico & Nadia Fiorino & Roberto Ricciuti, 2024. "The Impact of Government Size on Corruption: A Meta-Regression Analysis," CESifo Working Paper Series 10956, CESifo.
    4. Kumara, Ajantha Sisira & Handapangoda, Wasana Sampath, 2014. "Political environment a ground for public sector corruption? Evidence from a cross-country analysis," MPRA Paper 54721, University Library of Munich, Germany, revised 22 Mar 2014.
    5. LABED Lazhar & BOUCENNA Mohammed Ridha & BENZOUAI Mohamed Cherif, 2022. "Analyzing The Impact Of Corruption On Income Levels Disparity Between Countries," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 17(2), pages 160-175, August.
    6. Enste, Dominik & Heldman, Christina, 2017. "Causes and consequences of corruption: An overview of empirical results," IW-Reports 2/2017, Institut der deutschen Wirtschaft (IW) / German Economic Institute.
    7. Fazlı YILDIZ, & Ersin Nail SAGDIC, & Guner TUNCER, 2017. "Budgetary Transparency, E-Government And Corruption: New Evidence From Panel Data Approach," EcoForum, "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration - Economy, Business Administration and Tourism Department., vol. 6(1), pages 1-55, January.

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    More about this item

    Keywords

    Corruption; Government Size; Democracy; Instrumental Variable Estimation;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government

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