The Determinants of Corruption: Cross‐Country‐Panel‐Data Analysis

Abstract

This study explores the determinants of corruption, utilizing the H ausman and T aylor's technique to estimate a random effects model that incorporates both the effects of corruption determinants that vary over time and those that are time‐invariant, and using a larger panel dataset and a comprehensive set of corruption determinants. The first interesting result is that perception of strong support for rule of law is strongly correlated with reduced corruption, suggesting that a better quality of law enforcement reduces corruption. Rich countries have lower corruption, and the perception of free expression and accountability strongly decreases corruption, indicating that providing greater opportunities for citizens to participate in selecting their government, more freedom of expression, and free media are effective ways of curbing corruption. Conversely, natural resource abundance, country population size, country's dominant religious tradition, ethnic fractionalization, and political stability are unimportant determinants of corruption, while previous research has suggested they are important.