Abstract

In the literature on political economy and public choice, it is typically assumed that government size correlates positively with public corruption. The empirical literature, however, is inconclusive, owing to both measurement problems and endogeneity. This paper creates a corruption index based on original data from a survey covering top politicians and civil servants in all Swedish municipalities. The effect of more politicians on corruption problems is analyzed using discontinuities in the required minimum size of local councils. Despite the fact that Sweden consistently has been ranked among the least corrupt countries in the world, the survey suggest that non-trivial corruption problems are present in Sweden. Municipalities with more local council seats have more reported corruption problems, and the regression discontinuity design suggests that the effect is causal.

Highlights

  • What is the causal effect of government size on political corruption? A large number of papers have examined the relationship, but no consensus has emerged (Holcombe and Boudreaux 2015; Kotera et al 2012; Fan et al 2009; Gerring and Thacker 2005; Fisman and Gatti 2002; Goel and Nelson 1998)

  • A measure of corruption is created using a detailed survey developed in 2007 and administered to local politicians and civil servants in 2008. Using both the ordinary least squares (OLS) method, an instrumental variable (IV) approach and a regression discontinuity design (RDD), our results suggest that increasing the number of seats in local councils leads to more corruption problems

  • We show the relation between corruption and council size conditional on total expenditure, municipality population and income, newspaper presence, and electoral competition

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Summary

Introduction

What is the causal effect of government size on political corruption? A large number of papers have examined the relationship, but no consensus has emerged (Holcombe and Boudreaux 2015; Kotera et al 2012; Fan et al 2009; Gerring and Thacker 2005; Fisman and Gatti 2002; Goel and Nelson 1998). A measure of corruption is created using a detailed survey developed in 2007 and administered to local politicians and civil servants in 2008 Using both the ordinary least squares (OLS) method, an instrumental variable (IV) approach and a regression discontinuity design (RDD), our results suggest that increasing the number of seats in local councils leads to more corruption problems. Their estimates suggest that on the national level, the United States has too few representatives, while France and Italy have too many Another closely related paper is Fan et al (2009), who combine cross-country analysis with firm-level data to find that in countries with larger numbers of governmental or administrative tiers, and with more local public employees, reported bribery is more frequent. No clear theoretical prediction exists regarding how larger councils should affect corruption problems, and the issue must be examined empirically

Swedish municipalities
Corruption in Swedish municipalities
Other municipality data
Empirical model
Identification strategy
Results
Instrumental variable estimation
Regression discontinuity design
Additional robustness tests
Concluding discussion
Full Text
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