Abstract
<p>The theoretical literature in economics and political science has made numerous efforts in understanding the determinants of corruption and stressed the importance of political institutions in shaping the patterns of government corruption. Nevertheless, very few researches focus on the role of judicial system. Employing a formal model with empirical analyses, I incorporate economic factors with political constraints to investigate the different roles of democracy and judicial independence in determining the level of bureaucrats’ corruption across countries. Empirically, the instrumental variable (IV) approach is applied to resolve the endogeneity problems. The evidence indicates that different levels of corruption across countries are significantly influenced by the degrees of judicial independence. To fight corruption successfully, I contend that the judiciary, as a hard institutional constraint to resist bureaucratic corruption, has to be independent from the government. </p>
Highlights
Corruption, as government officials use public powers for private economic interests, has been the hot topic of debate among social scientists
In order to estimate the impact of political institution on corruption level, I need find a source of exogenous variation in political institution, an instrumental variable (IV), to remove the spurious correlation between the explanatory variable and unobserved characteristics
The validity of inferences from an IV analysis depends on the appropriateness of the exclusion restriction assumption, which imply that, conditional on the controls included in the regression, YCR and tenure have no effect on corruption level today, other than their effect through the institutional development of judicial independence
Summary
Corruption, as government officials use public powers for private economic interests, has been the hot topic of debate among social scientists. Evidence of bureaucratic corruption exists in all economies, at various stages of development, and under different political and economic regimes Why is it more pervasive in some societies than in others? Employing a formal model with empirical analyses, the author incorporated economic factors with political constraints to investigate the different effects of democracy and judicial system on the level of corruption and argue the judiciary, as a hard institutional constraint to resist bureaucratic corruption, has to be independent from the government. Many comparative studies report a significant relationship between democracy and the level of corruption based on various regression approaches without controlling judicial independence. In my view, these empirical conclusions on the “Democratic Clean Theory” are theoretically and empirically problematic. My empirical evidence will be provided in Section four and the brief discussion and conclusion in the end
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