Exploring differences in corruption: the role of neighboring countries

The aim of this paper is to study whether corruption spreads across neighboring countries. Spatial econometric techniques are used to analyze corruption interactions, testing whether the perception of corruption in neighboring countries affect a country's own corruption once other variables are controlled for. For a given country it is found that corruption varies neither with the behavior of its neighbors (there is no endogenous interaction) nor with their exogenous characteristics (there is no contextual interaction). Corruption is therefore not contagious, but neighboring countries tend to show similar levels of corruption because they face similar characteristics and similar institutional environments.