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Corruption and Fiscal Decentralization: A Comparative Analysis for Developed and Developing Economies
AbstractFiscal decentralization is thought to be a tool to control corruption and improve governance in the economy. Theoretical literature on fiscal federalism supports this idea by establishing the argument of more transparency in smaller jurisdictions. The present study examines the impact of fiscal decentralisation on the prevalence of corruption in the economy. Panel estimation methodology is used separately for two datasets of total 52 economies for the period of 24 years from 1990 to 2014. The dataset were consisted upon 28 developed economies and 24 developing economies. Moreover, conductance of a comparative analysis of whether the impact of fiscal decentralization on corruption remains the same in developed and developing economies or varies with the change in the level of development of economies. The results of the study indicate that fiscal decentralization has an adverse effect on corruption in developing economies. While, fiscal decentralization contributes positively in reduction of corruption in developed economies.
- Faiz Ur Rahim
- Assistant Professor, International Institute of Islamic Economics (IIIE), International Islamic University Islamabad, Pakistan
- Rukhsana Parveen
- MS Economics Research Scholar, International Institute of Islamic Economics (IIIE), International Islamic University Islamabad, Pakistan