Corruption, Democracy, Economic Freedom, and State Strength

Abstract

While it is widely acknowledged that corruption has negative effects on economic growth, investment, and social welfare, the structural causes of corruption have received very little quantitative country-level cross-national analysis. Our structural equation-based analysis of data for 91 nations includes several important determinants of cross-national variation in perceived levels of corruption. Our analyses yield four major findings: 1) democracy, as measured by indicators of political rights, civil liberties, and press freedom, has a positive effect on perceived level of corruption control; 2) state strength has a positive direct effect; 3) openness of the economy, as measured by economic freedom, has a positive effect; and 4) ethnolinguistic fractionalization has both direct and indirect negative effects.