Do Neoliberal Policies Deter Political Corruption?

Abstract

This article probes the relationship between neoliberal economic policies and political corruption, focusing in particular on the impact of trade and investment policies, regulatory policy, and the overall size of the public sector on corruption. Using a large cross-national data set from the mid- to late 1990s, we test the neoliberal hypotheses that market-oriented economic policies are associated with lower levels of political corruption, and state intervention in the economy with higher levels. Consistent with the neoliberal argument, we find that open trade and investment policies and low, effective regulatory burdens do correlate with lower levels of political corruption. However, we find no consistent relationship between the aggregate size of the public sector and political corruption. While the neoliberal hypothesis on political corruption has initial empirical support, its lessons cannot be applied wholesale. Market-oriented states may be less corrupt, but interventionist states, as measured by public spending, are not necessarily more corrupt.Previous versions of this article were presented at the annual meeting of the International Studies Association, New Orleans, La., March 24–27, 2002; the Seminar on U.S. and World Affairs, Hoover Institution, Stanford University, Palo Alto, Calif., January 2003; and the Seminar on Comparative Politics, Department of Political Science, Stanford University, February 2003. The authors thank participants at each of these venues for their valuable comments. Alberto Díaz-Cayeros, Chappell Lawson, Armando Razo, and three anonymous reviewers provided especially useful suggestions. The usual disclaimers apply. Gerring is grateful for financial support provided by the Institute for Advanced Study, and Thacker for the support provided by the Hoover Institution, Stanford University. Both Gerring and Thacker are thankful for support from the Frederick S. Pardee Center for the Study of the Longer-Range Future, Boston University.