Theoretical Perspectives, International Experience and Policy Reform
Studies in Fiscal Federalism and State–local Finance series
Edited by Santiago Lago-Peñas and Jorge Martinez-Vazquez
Chapter 4: Corruption and the size of local governments: are they related?
Corruption of government officials has attracted the interest of economists for more than three decades. Two major strands have evolved from the literature over that time period, one dealing with how corruption influences economic performance and the other focusing on identifying what factors and institutional arrangements deter corrupt behavior. Our understanding of both has been aided by the recent introduction of measures of perceived or experienced corruption for individual countries. The availability of these data has led a substantial body of empirical work addressing various issues in both strands of the literature. Separately, there has been a movement globally towards more decentralized government structures with the promise that this will lead to improved accountability on the part of public officials and greater efficiency in the delivery of government services (World Bank, 1999, Chapter 5; Arzaghi and Henderson, 2005). These decentralization initiatives have taken several forms including the devolution of spending and tax authority to subnational governments (fiscal decentralization), and, in some cases, an increase in the number of subnational units of government with the goal of promoting competition among these suppliers of government services.
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