Corruption and reforms: Are liberal democracies different?

Abstract

In this study we examine the impact on corruption of economic reforms, international linkages, and the interaction of past reforms with current international flows for a large group of countries over a period of more than three decades within a dynamic panel data framework. We consider two economic reforms (greater trade and financial openness) and their corresponding international linkages (international trade and foreign direct investment intensities). Among the reform and intensity measures, only the FDI inflow intensity indicator appears to have a direct, negative effect on corruption. However, past trade and financial reforms interacted with subsequent levels of foreign investment and trade reduce corruption, particularly in liberal democracies.