Abstract
This paper examines the effect of fiscal decentralization in a country on the level of corruption. Using a tax competition framework with rent-seeking behavior, it is shown theoretically that fiscal decentralization, modeled as an increase in the number of competing jurisdictions, leads to a lower level of corruption. This result is then tested using a small, cross-country data set. The empirical results are not very strong, but they suggest that the hypothesized relationship between decentralization and corruption may indeed exist.
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Arikan, G.G. Fiscal Decentralization: A Remedy for Corruption?. International Tax and Public Finance 11, 175–195 (2004). https://doi.org/10.1023/B:ITAX.0000011399.00053.a1
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DOI: https://doi.org/10.1023/B:ITAX.0000011399.00053.a1