Globalization and Corruption, revisited

This paper presents new empirical evidence on the determinants of corruption, focussing on the role of globalisation and inequality. The estimates for a panel of 102 countries over the period 1995-2005 point to three main results: (i) Detection technologies, reflected in a high level of development, human capital and political rights reduce corruption, whereas natural resource rents increase corruption; (ii) Globalisation (in terms of both trade and financial openness) has a negative effect on corruption, which is more pronounced in developing countries; (iii) Inequality increases corruption, and once the role of inequality is accounted for, the impact of globalisation on corruption is halved. In line with recent theory, this suggests that globalisation - besides reducing corruption through enhanced competition - affects corruption also by reducing inequality.