CORRUPTION & FISCAL DECENTRALIZATION: EVIDENCE FROM SOME DEVELOPING COUNTRIES

The theoretical literatures regarding the effect of fiscal decentralization on corruption lead to ambiguous results .In other words, although due to more transparency caused by higher decentralization one can expect to witness lower corruption but due to higher family ties as a result of more decentralization we may expect higher corruption. Therefore, recently researchers concentrated on empirical studies to resolve the problem. This paper empirically Investigate the effect of fiscal decentralization on the level of corruption in some developing countries. The empirical analysis is based on data from a sample of 28 developing countries for the period 2002-2008. The results of estimating regression models using Generalized least squares (GLS method did not support that higher fiscal decentralization can lower corruption in the countries under considerations as well low income countries. However, for the case of middle or high income countries our findings indicate the negative impact of decentralization on corruption. Therefore, it is suggested that for low income countries other policy tools required in order to alleviate the detrimental impact of corruptions.