Political decentralization and corruption: Evidence from around the world

Article history: Received 11 September 2007 Received in revised form 9 September 2008 Accepted 10 September 2008 Available online 16 September 2008 How does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials? Previous empirical studies, using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization, have suggested conflicting conclusions. In search of more precise findings, we combine and explore two new data sources—an original cross-national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms' concrete experiences with bribery. In countries with a larger number of government or administrative tiers and (given local revenues) a larger number of local public employees, reported bribery wasmore frequent.When local—or central—governments received a larger share of GDP in revenue, briberywas less frequent. Overall, the results suggest the danger of uncoordinated rent-seeking as government structures become more complex. © 2008 Elsevier B.V. All rights reserved.