Decentralization, corruption, and the role of democracy

Abstract

In this paper, I consider how the level of democracy moderates the relationship between decentralization and corruption. While there is an expectation within the policy community that decentralization prevents corruption, previous research on this relationship has been inconclusive. I argue that the potential for decentralization to curb corruption is dependent on the presence of institutions that give citizens information on government behavior and the capacity to act upon the given information. I therefore predict that decentralization promotes less corrupt activities in democratic countries, but not in authoritarian countries where no such institutions exist. Using numerous decentralization indicators in a crosssectional regression with up to 72 countries in the sample, the data lend support to democracy’s conditional effect on the relationship between decentralization and corruption. I find that fiscal decentralization and administrative decentralization are associated with lower corruption levels in democracies and higher corruption in authoritarian countries. There is, however, no robust impact of political decentralization upon corruption levels, which indicates that political decentralization overall is an ineffective tool for curbing corruption.