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Uncovering the determinants of corruption

Author

Listed:
  • Michael Jetter

    (Business School, University of Western Australia)

  • Christopher F. Parmeter

    (Department of Economics, University of Miami)

Abstract
Identifying the real causes of corruption has proven difficult because of limited data availability, lack of a unifying theoretical framework, and endogeneity concerns. Combining data for a comprehensive list of 36 potential determinants of corruption across 123 countries (including 87 percent of the world population), we use Instrumental Variable Bayesian Model Averaging to account for model uncertainty and endogeneity. In addition to income levels, the extent of primary schooling emerges as a powerful predictor of lower corruption levels. Rule of law and FDI matter particularly in developing countries. Finally, we find some evidence for trade freedom, political rights, government size, and religious fractionalization to contain corruption. These findings offer feasible avenues for policymakers, as corruption does not seem to be driven by deeply rooted cultural attributes.

Suggested Citation

  • Michael Jetter & Christopher F. Parmeter, 2016. "Uncovering the determinants of corruption," Working Papers 2016-02, University of Miami, Department of Economics.
    • Handle: RePEc:mia:wpaper:2016-02
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    File URL: https://www.herbert.miami.edu/_assets/files/repec/WP2016-02.pdf
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    More about this item

    Keywords

    Corruption; Bayesian Model Averaging; Primary Education; Instrumental Variable Bayesian Model Averaging Publication Status: Under Review;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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