Is Federalization a Corruption-Abatement Strategy in Developing Countries?

Would a shift to a Federal system raise or lower corruption in low-income countries? Local ownership, which is a strong argument for control of corruption under a Federal system, may not always be effective in jurisdictions with weak institutions. Our theoretical model shows that the net effect of t...

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Bibliographic Details
Published in:Asian journal of law and economics 2023-01, Vol.13 (3), p.323-350
Main Authors: Fabella, Raul, Daway-Ducanes, Sarah Lynne, Jandoc, Karl Robert, Arzadon, Irene Jo
Format: Article
Language:English
Subjects:
Compliance
control of corruption
Corruption in government
Decentralization
Developing countries
Federalism
fiscal decentralization
H10
H40
H70
LDCs
low-income countries
O10
Public finance
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Summary:Would a shift to a Federal system raise or lower corruption in low-income countries? Local ownership, which is a strong argument for control of corruption under a Federal system, may not always be effective in jurisdictions with weak institutions. Our theoretical model shows that the net effect of these conflicting pressures cannot be determined . Thus, we test empirically whether federalism and/or federalism are each a good predictor of control of corruption. We find that in countries with sufficiently high quality of governance or levels of development, neither federalism nor federalism matters as much as other dimensions of governance. However, in countries with poor governance, federalism may have an adverse effect on control of corruption. A developing economy, which ranks poorly in terms of governance, cannot expect a reduction in corruption to follow a shift to a Federal system.
ISSN:2154-4611
2154-4611
DOI:10.1515/ajle-2022-0026