Corruption and politicians’ horizon

Abstract

This paper presents cross-country evidence about the relationship between politicians’ horizon and their rent-seeking behavior. Using information from CIA’s World Factbook and from the National Elections across Democracy and Autocracy dataset, we construct variables of term limits, term length and political turnover at the top executive level. We simultaneously estimate the correlations between these three variables and corruption—measured using a corruption index—from pooled cross-sections of 137 developed and developing countries observed from 2000 to 2015. We find a positive correlation between corruption and: (i) term limits at low level of term length, (ii) term length in the absence of term limits, and (iii) political turnover. Results suggest that politicians behave best if there are no term limits and frequent elections. We also provide evidence that the downward sloping part of a U-shape relationship between political turnover and corruption previously found in empirical papers can be explained by accountability and observability technologies. Theoretical mechanisms that can explain these findings are discussed.