Economic preferences and state-level corruption: global evidence and mechanism

ABSTRACT

Using newly published data from the Global Preference Survey which cover 76 countries (Falk et al., 2018), we document robust evidence that economic preferences are partly responsible for state-level corruption. Specifically, fixed effects estimation results show that patience, trust, and altruism discourage corruption, while negative reciprocity encourages corruption. We examine the role of economic freedom and government effectiveness as the mechanisms underlying the effect of negative reciprocity. We also find that the effects of patience and negative reciprocity are greater in a more stable political environment, and smaller in a society with faster economic growth.

KEYWORDS:

• Economic preferences
• corruption
• government effectiveness
• mechanism

Disclosure statement

The author declares that she has nothing to disclose.

Notes

¹ See, for example, Bardhan (1997); Ehrlich and Lui (1999); Lambsdorff and Frank (2011).

² For more details about the Survey, see Appendix A.

³ Appendix B provides details about the preferences measures in the Survey.

⁴ See Appendix Table A2 for correlations between key variables. Also see Appendix Figure A2 for correlations between corruption and economic preferences.

⁵ A country’s legal system origin can be divided into British, French, German, Scandinavian, and socialist legal systems.

⁶ The magnitudes of the effects we find are comparable to the exiting studies on the determinants of corruption (e.g. Braun and Di Tella 2004; Goel and Nelson 2005; Khan 2021).

Additional information

Funding

This work was supported by the Shanghai Municipal Human Resources and Social Security Bureau [2020PJC103].