Corruption and size decentralization

Statistical tests based on newly collected cross-sectional data suggest that countries which have more first-tier subnational governments relative to their population are more corrupt. I measure the strength of association between “corruption” and the variables “population per regional government” and “average area of first-tier unit,” both individually and combined as the interaction effect “size decentralization,” in 100 randomly selected countries. Two theoretical arguments may explain these associations: (i) the greater the quantity of first-tier subnational units with monopolistic powers, such as legal and regulatory sanctions, the greater the incentives for bribery and extortion; and (ii) elected authorities and public servants of smaller regional governments are more vulnerable to capture by a corrupt private elite, especially when control and accountability mechanisms are weaker than national ones. This paper also provides some support for existing corruption theories, namely that wealthy countries with Protestant societies use democratic systems more effectively to control corruption.