Gabriella R. Montinola

Sources of Corruption: A Cross-Country Study

Why is government corruption more pervasive in some societies than in others? In this article we examine public choice explanations that attribute corruption to a lack of competition in either political or economic arenas or both. The principal part of our analysis draws on recently-published data about levels of corruption for a broad cross-section of countries reported for the early 1980s. We supplement this with an additional analysis of a second dataset on corruption measured during the late 1980s. Our analyses confirm that political competition affects level of corruption, but this effect is nonlinear. Corruption is typically lower in dictatorships than in countries that have partially democratized. But once past a threshold, democratic practices inhibit corruption. However, we obtained mixed results with respect to the relationship of economic competition and corruption: government size does not systematically affect corruption, but membership of the Oil Producing and Exporting Countries (OPEC) does. Finally, corruption is more pervasive in low-income countries which tend to underpay public sector employees.

Toward a methodology for the comparative study of political corruption

Robust explanations of political corruption demand that research progresses beyond purely theoretical analyses and single case studies. In this article, we highlight problems of definition, operationalization and measurement of corruption that have restricted the number of truly comparative, empirical studies of the phenomenon. We suggest a few steps that might help researchers overcome methodological obstacles in their study of corruption. We introduce and evaluate one example of how the phenomenon might be comparatively operationalized and measured. While not beyond criticism, the corruption index we present will undoubtedly help light new avenues toward more comprehensive explanations of comparative political corruption.

Veto Players and the Rule of Law in Emerging Democracies

The authors investigate the relationship between constitutional design and the rule of law in emerging democracies. The authors provide a formal logic to the Madisonian assertion that increasing the number of veto players strengthens the rule of law. The model shows that as the number of veto players in government increases, their ability to collude on accepting bribes decreases; therefore, their incentive to vote on legislation strengthening the rule of law increases. The authors classify governments according to the number of veto players, following the logic proposed by Tsebelis. The authors test hypotheses derived from their model on 35 emerging democracies using veto-player data that they gathered for the analyses. The authors find that systems with multiple veto players have higher levels of the rule of law. Furthermore, independent of the number of veto players, presidential systems have lower levels of the rule of law than do parliamentary systems.

Does Foreign Aid Support Autocrats, Democrats, or Both?

Does foreign aid prop up recipient governments? Although many people argue that it does, there is little systematic evidence to support this claim. We argue that aids effects on government survival depend on both the recipients regime type and the analysts time horizons. In the long run, continued aid helps autocrats more than democrats because the former can stockpile this aid for use against future negative shocks. However, because large stocks of aid reduce the marginal impact of current aid, current aid helps democrats more than autocrats. We test and find support for our argument with a survival analysis of 621 leaders in 123 countries from 1960 to 1999. Our results imply that donors should make both the nature of aid and the use of aid conditionality contingent on the domestic regime type of aid recipients.

Comparative Political Corruption: Issues of Operationalization and Measurement*

As with other areas of comparative political inquiry, analyses of political corruption must carefully negotiate around numerous methodological issues. In this article, we focus primarily on problems of operationalization and measurement of corruption. We evaluate the major examples of cross-country measures of corruption that have recently emerged and review research that has incorporated the new measures. We end with a discussion of an alternative method for the cross-national measurement and analysis of corruption, one that might also facilitate the goal of establishing universal principles and causal claims about political corruption.

Who Recovers First? Banking Crises Resolution in Developing Countries

This article evaluates conditions that facilitate banking crises resolution using data from 67 developing countries from 1980 to 1995. In particular, the author examines explanatory variables under three categories: external macroeconomic constraints, the role of the International Monetary Fund (IMF), and domestic political conditions. The principal results of the analyses are twofold. First, IMF credits decrease the probability of resolving banking crises. This result holds controlling for potentially confounding variables and in a test for endogeneity. Second, the decisiveness of a political regime significantly influences the probability of emerging from systemic distress. Specifically, in cases of moderate banking distress, decisiveness facilitates resolution of crisis, but during periods of severe crises, less decisive governments (i.e., governments constrained by accountability groups) are likely to recover more quickly than are those with less constrained executives.

The Uses and Abuses of Foreign Aid Development Aid and Military Spending

Research shows that foreign aid promotes economic development in democracies but not in autocracies. Although explanations for this phenomenon vary, a common theme is that autocracies are more likely to misuse aid. We provide evidence of such misuse, showing that autocracies are more likely than democracies to divert development aid to the military. Theoretically, we build on “selectorate” models in which autocrats respond to aid by contracting civil liberties. Because this strategy requires military capacity, autocracies but not democracies should spend aid on the military. We support this hypothesis empirically, providing further evidence that autocracies misuse foreign aid.

The Philippines in 1998: Opportunity amid Crisis

Apprehension and malaise filled the air as the new year started in the Philippines. One reason was the state of the economy. After four years of respectable growth rates, the Philippine economy was stalled on the way to tigerhood by the global economic crisis, which at the years end was still causing problems in emerging markets around the world. The crisis began in neighboring Thailand on July 2, 1997, when the Thai baht plummeted by nearly 20%. Within a few weeks, other currencies around the region, including the Philippine peso, followed suit.1 By October 1998, the Philippine peso was worth 40% less against the U.S. dollar than it was in June 1997. The sharp depreciation of Southeast Asian currencies made more likely the prospect of default on dollar-denominated loans by both financial and nonfinancial institutions around the region. The prospect of collapsing banks and business enterprises created a crisis of confidence among lenders and investors in the region, leading them to eschew new loans and pull out their capital as quickly as possible. As early as mid-August 1997, Bangkoks main stock index dropped by nearly 50%, Jakartas by 40%, Kuala Lumpurs by 17%, and Manilas by 10%.2 Although Philippine banks expected to have fewer nonperforming loans than other banks around the region and the losses experienced by the countrys stock market were less severe than those experienced in neighboring countries, by December 1997 the Philippine government was forecasting slower growth as well as higher inflation, unemployment, and poverty rates. Based on their experience in previous economic downturns, many, if not all, Filipinos were aware that harder times were likely.

Helping hand or heavy hand? Foreign aid, regime type and domestic unrest:

Does foreign aid affect domestic political unrest? ‘Selectorate’ models of political survival predict that foreign aid should lead autocratic governments, but not democratic ones, to restrict civil liberties. This requires investment in repressive capacity, which should in turn deter unrest. We thus argue that foreign aid should reduce unrest in autocracies but not in democracies. We find strong support for this hypothesis in a sample of 84 countries from 1970 through 2007, as well as evidence for our causal mechanism. Our results add to the mounting evidence that foreign aid has more desirable effects when targeted at democratic regimes.

Foreign Aid, Time Horizons, and Trade Policy

Although there are theoretical reasons to expect foreign aid to promote trade liberalization, empirical research has found no relationship. Without disputing this general nonresult, we argue that foreign aid can incentivize liberalization under certain conditions. In the absence of aid, the incentive to liberalize trade depends on government time horizons: Far-sighted governments have incentives to do so, whereas short-sighted governments do not. It follows that foreign aid should not encourage far-sighted governments to liberalize, as they do so in any case. Foreign aid can, however, induce short-sighted governments to liberalize by ameliorating short-term adjustment costs. We thus hypothesize that aid is more likely to promote trade liberalization when given to governments with short time horizons. We support this hypothesis with an analysis of aid, time horizons, and two measures of trade policy. Our results contribute to the growing debate about the conditions under which foreign aid encourages growth-enhancing policies.