Virtual versus Physical Government Decentralization: Effects on Corruption and the Shadow Economy

Abstract

This paper examines the relative effectiveness of cross‐national virtual decentralization and physical decentralization of government functions on corruption and the shadow economy. Results show that while virtual decentralization reduces both corruption and the shadow economy, physical decentralization reduces only the shadow economy. The e‐government results are robust to alternate measures and specifications, while those of government tiers are not.