Sociopolitical and economic causes for corruption in developing countries: a cross country empirical study

Abstract

Corruption in developing countries has been higher than developed countries. Most important objective of this study is to investigate the impacts of economic and political freedom on corruption in developing countries. This empirical work engages 70 developing countries during 2000-2004 from all regions over the world. It examines the relationship between corruption, measured by corruption perception index and economic political causes of corruption, measured by direct and proxy measures. Results of regression analysis show that economic freedom significantly and positively affects corruption. Even democratic freedom positively affect corruption, it does not have statistical significant. Economic variables, income level of nations, economic freedom, capability of information accesses and tertiary education have negative effects on degree of corruption in developing countries. Corruption reduces income inequality and increase poverty in developing countries. Dependency of agriculture, unemployment and governments long procedure to start economic activities negatively related with corruption in developing countries. Democracy, multi party political system and weak majority of government (unstable regime) reduce the corruption. Human right violations, conflicts and violence and non peace environment increase the corruption. Economic freedom is more powerful determinant in reduction of corruption than democratic freedom. This study concludes that increasing of economic freedom and openness, less control of governments rule and regulations to start business activities and increasing of peoples information capability via extensive development of information accesses such as education, internet, telephones and institutions will leads to reduction of corruption in developing countries. In a political view, even thought more democratization, human security and capacity of peace building environment reduce corruption; democratic freedom has less power to reduce the corruption than economic freedom. However, consequences of these determinants differ country to country based on country's leadership, peoples attitudes, sociopolitical institutions and religious and cultural ethos.