Corruption: Transcending Borders

13 Pages Posted: 21 Mar 2014

See all articles by Esteban Aleman

Esteban Aleman

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Jimena Davila

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Michael Jetter

University of Western Australia; IZA

Alejandra Montoya

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Daniela Morales

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Date Written: January 27, 2014

Abstract

Is corruption capable of spreading across national borders? This paper uses panel data for 120 countries from 1995 to 2012 to evaluate whether the corruption levels of neighboring countries, as weighted by the relative joint border length, affects domestic corruption. Including country fixed effects allows us to control for unobservable country specific aspects and our results suggest a positive and statistically significant relationship. In general, a ten point increase in the weighted freedom from corruption index of neighboring countries is associated with a one point increase of the domestic freedom from corruption index. This result is robust to a variety of alternative specifications, such as a GMM estimation or including additional control variables. The proposed effect becomes stronger as income increases and the relationship is only positive for countries with a GDP per capita above US$1,600 (in 2000 US$). For the richest countries, the estimated coefficient rises up to 0:43.

Keywords: corruption, neighborhood effects, panel data

JEL Classification: D73, F63, O57, R10

Suggested Citation

Aleman, Esteban and Davila, Jimena and Jetter, Michael and Montoya, Alejandra and Morales, Daniela, Corruption: Transcending Borders (January 27, 2014). Center for Research in Economics and Finance (CIEF), Working Papers, No. 14-02, Available at SSRN: https://ssrn.com/abstract=2411644 or http://dx.doi.org/10.2139/ssrn.2411644

Esteban Aleman

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Bogotá
Colombia

Jimena Davila

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Bogotá
Colombia

Michael Jetter (Contact Author)

University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
AUSTRALIA

Alejandra Montoya

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Bogotá
Colombia

Daniela Morales

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Bogotá
Colombia

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