Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

Abstract: This paper presents new empirical evidence on the determinants of corruption, focussing on the role of globalization and inequality. The estimates for a panel of 102 countries over the period 1995-2005 point to three main results: i) Detection technologies, reflected in a high level of development, human capital, and political rights reduce corruption, whereas natural resource rents increase corruption. ii) Globalization (in terms of both trade and financial openness) has a negative effect on corruption, which is more pronounced in developing countries. iii) Inequality increases corruption, and once the role of inequality is accounted for, the impact of globalization on corruption is halved. In line with recent theory, this suggests that globalization – besides reducing corruption through enhanced competition – affects corruption also by reducing inequality.

Keywords: Globalization, inequality, corruption

JEL-codes: F1; F3; F4; O1 April 2012

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