Maria Rosaria Alfano
Anna Laura Baraldi
Claudia Cantabene

the effect of fiscal decentralization on corruption: a non-linear hypothesis

This study advances the literature on the effect of decentralization on corruption by proposing a theoretical motivation for the hypothesis that the corruption-minimizing decentralization arrangement prescribes intermediate decentralization degrees: a ‘middle’ decision-making power of local governors may mitigate the trade-off between the rent-seeking incentive for local politicians and the effectiveness of their voters’ monitoring. The estimation of a non-linear empirical model strongly confirms that a decentralization degree between 15% and 21% minimizes corruption even through different estimation procedures, introduction of control variables, and the use of internal and external IV and of alternative decentralization and corruption measurements.

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Suggested Citation

Alfano, Maria Rosaria; Baraldi, Anna Laura; Cantabene, Claudia (2018): The Effect of Fiscal Decentralization on Corruption: A Non-linear Hypothesis. Version: 1. German Economic Review. Dataset.

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