Do Neoliberal Policies Deter Political Corruption?

Abstract

This article probes the relationship between neoliberal economic policies and political corruption, focusing in particular on the impact of trade and investment policies, regulatory policy, and the overall size of the public sector on corruption. Using a large cross-national data set from the mid- to late 1990s, we test the neoliberal hypotheses that market-oriented economic policies are associated with lower levels of political corruption, and state intervention in the economy with higher levels. Consistent with the neoliberal argument, we find that open trade and investment policies and low, effective regulatory burdens do correlate with lower levels of political corruption. However, we find no consistent relationship between the aggregate size of the public sector and political corruption. While the neoliberal hypothesis on political corruption has initial empirical support, its lessons cannot be applied wholesale. Market-oriented states may be less corrupt, but interventionist states, as measured by public spending, are not necessarily more corrupt.