Localization and Corruption: Panacea or Pandora's Box?
39 Pages Posted: 13 Jan 2005
Date Written: January 2005
Abstract
An extensive literature on the relationship between decentralization (or localization) and corruption has developed in recent years. While some authors argue that there is a positive relationship between decentralization and corruption, others claim that decentralization in fact leads to a reduction in the level of corruption. This important policy question has not yet been laid to rest since previous empirical work simply uses eclectic regressions and lacks a conceptual framework to discover the root causes of corruption. Gurgur and Shah attempt to fill this void by presenting a framework in identifying the drivers of corruption both conceptually and empirically to isolate the role of centralized decisionmaking on corruption. The following results emerge:
- For a sample of 30 countries (developing and industrial), corruption is caused by a lack of service orientation in the public sector, weak democratic institutions, economic isolation (closed economy), colonial past, internal bureaucratic controls, and centralized decisionmaking.
- Decentralization is found to have a negative impact on corruption, with the effect being stronger in unitary than in federal countries.
This paper - a product of the Poverty Reduction and Economic Management Division, World Bank Institute - is part of a larger effort in the institute to exchange ideas on the reform of public sector governance.
Keywords: Governance, Public Sector Management
Suggested Citation: Suggested Citation
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