Abstract
Ever since the spectacular boom and bust cycle of the Spanish real estate industry, endemic corruption at the local level has become a widely recognized problem in the national public discourse. In an effort to expose an under-explored political determinant, this paper investigates the effect of local and regional alignment in fomenting corruption at the Spanish municipal level. To do so, we construct an ample panel dataset on the prevalence of corrupt practices by local politicians, which is employed to test the possible impact of partisan alignment in three consecutive joint municipal and regional elections. Findings show aligned municipalities to be more corrupt than non-aligned ones, an effect that is further associated with absolute majorities at both levels of government and higher capital transfers. By contrast, we also show that “throwing the rascals out” could be an effective strategy for curbing the corrupt practices of aligned municipalities. This indicates that the democratic political process may be effective in corruption control if agreements can be reached to remove corrupt politicians or parties from power.
Highlights
Political corruption and malfunctioning governments are a widespread phenomenon on a worldwide level. 1 International organizations regularly highlight that the diversion of public funds for private benefit is probably one of the most important threats to the stability of many developed economies (Kaufmann et al 2004, 2009), with estimations equating the overall cost to be more than 5% of global GDP (OECD 2013), and increasing by about 10% the average cost of doing business (World Economic Forum 2008)
We investigate the important question of whether partisan alignment impacts corruption at the local level, constructing a dataset on corrupt practices from press news published over a period of 15 years, matching it with local and regional electoral data over three consecutive electoral cycles between 1999 and 2011
Column (1) only includes the treatment variable and municipality fixed effects (FE), finding that partisan alignment significantly increases the probability of a corruption case occurring by about 2 percentage points
Summary
Political corruption and malfunctioning governments are a widespread phenomenon on a worldwide level. 1 International organizations regularly highlight that the diversion of public funds for private benefit is probably one of the most important threats to the stability of many developed economies (Kaufmann et al 2004, 2009), with estimations equating the overall cost to be more than 5% of global GDP (OECD 2013), and increasing by about 10% the average cost of doing business (World Economic Forum 2008). A variety of studies have already shown that aligned municipalities benefit from more favorable budgetary decisions taken at a higher government level for countries as diverse as Albania (Case 2001), Brazil (Brollo and Nannicini 2012), France (Fabre 2014), India (Arulampalam et al 2009; Dey and Sen 2016), Italy (Bracco et al 2015; Carozzi and Repetto 2016), Portugal (Migueis 2013), Spain (Solé-Ollé and Sorribas-Navarro 2008; Curto-Grau et al 2018), and the United States (Levitt and Snyder Jr 1995; Larcinese et al 2006) According to this literature, the possibility of corruption could increase with the number of public programs that are being implemented at the local level, a possibility which is even higher for aligned municipalities.
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