Original Research

The impact of fiscal policies on corruption: A panel analysis

Monica V. Achim, Sorin N. Borlea, Andrei M. Anghelina
South African Journal of Economic and Management Sciences | Vol 21, No 1 | a1970 | DOI: https://doi.org/10.4102/sajems.v21i1.1970 | © 2018 Monica V. Achim, Sorin N. Borlea | This work is licensed under CC Attribution 4.0
Submitted: 06 June 2017 | Published: 04 April 2018

About the author(s)

Monica V. Achim, Department of Finance, Faculty of Economics and Business Administration, Babes-Bolyai University, Romania
Sorin N. Borlea, Department of Economics, Faculty of Economics, Informatics and Engineering, Vasile Goldiș Western University of Arad, Romania
Andrei M. Anghelina, Department of Economics, Faculty of Economics, Informatics and Engineering, Vasile Goldiș Western University of Arad, Romania


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Abstract

This article seeks to complement the previous literature and clarify whether fiscal policy plays a role in the level of corruption of a country. The present work investigates whether the increase in fiscal pressure leads to a higher level of corruption and whether the results differ from developed to developing countries. This article examines a large sample consisting of over 185 countries, during the period 2005–2014. The technique employed was short panel data. Five statistical models were used such as the pooled OLS, pooled FGLS, within model, between model and random-effects GLS model. Our main contribution consists in finding differentiated results of the influence of fiscal policy on the level of corruption among developed and developing countries. For developed countries, we found that, with high-quality institutions, low fiscal pressure leads to a lower level of corruption, which is in line with expectations. Conversely, in developing countries, with low-level institutional quality, low fiscal pressure increases corruption, because of low governance efficiency under which people may easily circumvent the law. Our findings suggest that governments and policy-makers need to acknowledge that the anti-corruption fight requires not only the right fiscal policies but also the right way of implementing these policies, recognising the role of quality institutions, which need to prevail in any country.


Keywords

corruption; fiscal policy; comparative; panel analysis

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