Federalism, Decentralisation and Corruption

Abstract

We investigate the empirical relationship between decentralisation and corruption. Using a newly assembled dataset containing data for up to 174 countries, we revisit the empirical evidence and seek to explain some of the inconsistent results that exist in the literature. We find that not only results differ due to the use of different specifications and data but more importantly because previous research overlooks the relationship between different dimensions of decentralisation. We propose an approach aimed at exploring the aggregate effect of decentralization on corruption. In this context, we analyze the existence of direct and indirect effects of these aspects on corruption. Our results suggest that fiscal (market) decentralisation is associated with lower corruption. However, we also find that constitutional decentralisation (federalism) is associated with higher corruption. Furthermore, we find that certain forms of political decentralisation worsen the positive effect of constitutional centralization on corruption. Finally, other forms of decentralisation such as spatial decentralisation do not appear to have a strong association with corruption. Our results suggest the possibility that previous empirical work may grossly overestimate de aggregate impact of decentralization and corruption.

Effect of Fiscal Desentralization and Region-wide Corruption Level in Indonesia

“…Interesting results from the research of Freille, et al [24] which divides decentralization, namely constitutional, political and fiscal (market).…”

One Size Fits All? Decentralization, Corruption, and the Monitoring of Bureaucrats

“…However, the results do not remain significant when trying to handle the problems arising from endogeneity. Freille, Haque and Kneller (2007a) analyzes the impact of different fiscal and constitutional decentralization measures on corruption within a cross section data set of 177 countries. Their results suggest that both fiscal decentralization and constitutional centralization are simultaneously associated with lower corruption.…”

In Search of New Paradigms in the Mexican Public Administration

“…Both political and administrative decentralization are important in order to improve the control and accountability in government, mainly at the local level. However, empirical evidence on the subject is often contradictory (Freille, Haque & Kneller, 2008). This suggests that no state institutional structure is better per se compared to another, but rather that its efficacy will depend on socio-political and cultural conditions, as well as on the level of development of each country.…”