IS POLITICAL ENVIRONMENT A BREEDING GROUND FOR PUBLIC SECTOR CORRUPTION? EVIDENCE FROM A CROSS-COUNTRY ANALYSIS

Ajantha Sisira Kumara

Abstract


This study employs the instrumental variable two-stage least squares regression approach for the data for 121 countries to explore the impact of a country’s political environment on its level of corruption. The study provides strong evidence that a higher degree of rule of law, press freedom, readiness and capacity to handle e-governance practices, and urbanization are associated with a lower level of public sector corruption across all 121 countries. The colonial dummies and having a presidential government are found to be valid instruments for rule of law in addressing the issue of endogeniety embedded in it. Further, to a certain degree, landlocked countries are relatively more corrupt than coastal countries. Finally, policy implications are discussed based on the findings of the study.
Keywords: Corruption, Political Environment, Endogeniety, Public Sector


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Sri Lanka Journal of Business Economics