Decentralization and Corruption: Evidence across Countries

By Raymond J. Fisman, Robert Gatti. 2002

1,499 citations recorded by the source corpus.

The relationship between decentralization of government activities and the extent of rent extraction by private parties is an important element in the recent debate on institutional design. The theoretical literature makes ambiguous predictions about this relationship, and it has remained virtually unexamined by empiricists. The authors make a first attempt at examining the issue empirically, by looking at the cross-country relationship between fiscal decentralization and corruption as measured by a number of different indices. Their estimates suggest that fiscal decentralization in government spending is significantly associated with lower corruption. Moreover, they find that the origin of a country's legal system - for example, civil versus common legal code - performs extremely well as an instrument for decentralization. The estimated relationship between decentralization, when so instrumented, and corruption is even stronger. The evidence suggests a number of interesting areas for future work, including investigating whether there are specific services for which decentralized provision has a particularly strong impact on political rent extraction, and understanding the channels through which decentralization succeeds in keeping corruption in check.

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Citations in the corpus

Infrastructure: A survey of recent and upcoming issues (2006, result): “Similar but more specific results are reached by Fisman and Gatti (2002a) with a much more sophisticated model specification applied to a data set of 59 countries.”
Decentralization and Corruption: Evidence from U.S. Federal Transfer Programs (2002, background): “Recent empirical evidence (Fisman and Gatti, 2000), based on cross-country regressions, suggests that decentralization may in fact be effective in reducing corruption, thus lending support to conventional wisdom, as well as the position taken on this issue by such organizations as the World Bank (se”
Decentralization and Political Institutions (2007, methodology): “The Hausman 36 Other studies (Fisman and Gatti, 2002; de Mello and Barenstein, 2001) used country legal origin as an instrument.”
Principal-agent problems in international organizations (2006, unknown): “This hypothesis is supported by Fisman and Gatti (2002).”
Yardstick competition in a Federation: Theory and Evidence from China (2012, background): “These results are consistent with those of Huther and Shah (1998), Barenstein and de Mello (2001) and Fisman and Gatti (2002) who all report that a larger subnational share of public expenditures was associated with lower corruption and those of Treisman (2000) and Arikan (2004) who explored…”
The Impact of Democracy and Press Freedom on Corruption: Conditionality Matters (2013, background): “The effect of decentralization is ambiguous, since it might involve double marginalization problems as discussed by Shleifer and Vishny (1993), but it potentially increases inter-jurisdictional competition as discussed by Fisman and Gatti (2002).”
The effectiveness of laws against bribery abroad (2008, background): “…such as reducing government intervention and discretion, increasing competition, reducing incentives for bribes, improving transparency in government activities, or government decentralization (Ades & Di Tella, 1997, 1999; Fisman & Gatti, 2002; Shleifer & Vishny, 1993; Rose-Ackerman, 1999).”
Accountability and Corruption: Political Institutions Matter (2001, unknown): “(1998), Treisman (2000), Fisman and Gatti (2000), Persson, Tabellini, and Trebbi (2001), and Kunicova and Rose-Ackerman (2002).”
The Value of Local Political Connections in a Low-Corruption Environment (2013, unknown): “9 Studies of electoral rules and fiscal federalism suggest that centralization can reduce electoral accountability (Fisman and Gatti, 2002).”
Privatization, competition, and corruption: how characteristics of bribe takers and payers affect bribes to utilities (2004, unknown): “…more political stability and have greater freedom of the press; are characterized by fiscal decentralization, and have parliamentary systems (see, for example, Ades and Di Tella, 1999, Fisman and Gatti, 2002, Knack and Azfar, 2000, Kunicova, 2001, Lederman, et al., 2001, Treisman, 2000, Wei, 2000).”
CAUSES AND EFFECTS OF CORRUPTION: WHAT HAS PAST DECADE'S EMPIRICAL RESEARCH TAUGHT US? A SURVEY (2018, unknown): “An early empirical study gave credence to this theory, finding that fiscal decentralization in government expenditure is strongly and significantly associated with lower corruption (Fisman and Gatti, 2002).”