Globalization, Inequality, and Corruption

This paper presents new empirical evidence on the determinants of corruption, focussing
on the role of globalization 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) Globalization (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 globalization on corruption
is halved. In line with recent theory, this suggests that globalization - besides reducing
corruption through enhanced competition - affects corruption also by reducing
inequality.