An Extension to the Theory of Corruption and the Size of the Public Sector as a Cause of Corruption

Corruption is still problematic in many countries including Sri Lanka. Up to now, thirteen theories of corruption have been developed. However, when examining Sri Lanka and some other countries, it can be observed that some public authorities in the same hierarchy or in different hierarchies get together and collectively engage in corruption. As such, these collective behavioural patterns of public authorities need to be captured by the theory of corruption. Moreover, empirical research studies show that the size of the public sector may have a relationship with the extent of corruption. In Sri Lanka also, the expansion of the size of the public sector by increasing public expenditure and the number of public sector employees can be seen. On this background, this paper (a) shows a direction to broaden the theoretical framework of corruption and (b) analyses the relationship between the size of the government and the extent of corruption. The theoretical contribution is made by comparing the new idea with existing theories. The relationship between corruption and the size of the public sector is examined by analysing cross-sectional secondary data in 2000, 2013, 2015 and 2016 pertaining to more than 100 countries. In this exercise, Corruption Perception Index (CPI) of selected years with regard to selected countries was regressed on the percentage of public expenditure in GDP, and the percentage of public sector’s employment in the entire country’s employment. After reviewing literature and based on the views of Adam Smith, when the novel idea was compared with the existing theories of corruption, the study finds that once public officials of the same hierarchy or in relevant hierarchies collectively engage in corruption, investigation of corruption becomes incapable or insufficient. Ultimately, the country law fails. The study also shows that coefficients of two regressors of the estimated regression models, namely public expenditure and the proportion of public sector employees in the total level of employment in economies are insignificant. The study concludes that even though readily available data on collective involvement of public sector officials is not available, theoretical idea on the collective engagement of public sector officials in corruption provides an avenue to expand the theoretical advancement in corruption. Insignificant regression coefficients of independent variables of the regression results emphasize that there is little scope to confirm the positive relationship between corruption and the size of the public sector in both developing and developed countries