Corruption, democracy and bureaucracy.docVIP

Theoretical and Applied Economics Volume XIX (2012), No. 9(574), pp. 17-28 Corruption, democracy and bureaucracy Aviral Kumar TIWARI ICFAI University, Tripura, India aviral.eco@ aviral.kr.tiwari@ Abstract. This paper examines the relationship of corruption with democracy and bureaucracy in the 82 countries in a panel framework. For the analysis we use rule of law, regulatory quality, control over corruption and secondary school enrollment ratio as control variables. We find that democracy, rule of law and control over corruption decreases the level of corruption. When we allowed for interaction effect among independent variables we find the evidence of strong interaction effect between all of the explanatory variables. We also find that, surprisingly, higher democracy and rule of law are positively associated with the level of corruption while higher bureaucracy negatively. Keywords: corruption; democracy; bureaucracy; panel data. JEL Codes: F35, C23, G39. REL Codes: 13I, 13J.  18 Aviral Kumar Tiwari 1. Introduction Corruption is everywhere. Every country either developed or developing is suffering from the negative consequences of the corruption; of course the level of corruption is different in different countries. Myint (2000) has correctly said that corruption occurs in all countries “both developed and developing, in the public and private sectors, as well as in non-profit and charitable organizations.” Though the phenomenon of corruption exist in each country, disregarding the level of severity of the problem, it is common in developing countries up such an extent that it is regarded as a way of life in Nigeria, it has become culture of Sierra Leone and in Sudan it is treated as fifth factor of production (Hwedie, 2000). Corruption is a multi-faced term and it is very difficult to give precise definition of it. Johnston (1999)