Fiscal capacity and multiple-equilibria of corruption: Cross-country evidence
✍ Scribed by Joarder Mohammad Abdul Munim
- Publisher
- John Wiley and Sons
- Year
- 2010
- Tongue
- English
- Weight
- 177 KB
- Volume
- 24
- Category
- Article
- ISSN
- 0954-1748
- DOI
- 10.1002/jid.1679
No coin nor oath required. For personal study only.
✦ Synopsis
Abstract
We test the proposition that higher initial fiscal capacity of a nation strengthens law and order, and therefore, inhibit corruption, and in a multiple‐equilibria setting, the economy will move towards the low‐corruption stable equilibrium. We have found a significant relationship between more initial fiscal capacity and less corruption in a large cross‐section of countries that became independent after World War II. Our findings also suggest that higher initial revenue capacity is a necessary condition but not a sufficient condition to reduce corruption. A government's willingness (benevolence) is also needed to combat corruption. Both of these variables help the economy to converge towards a ‘low‐corruption stable equilibrium’. Copyright © 2010 John Wiley & Sons, Ltd.