Fiscal transparency, legal system and perception of the control on corruption: empirical evidence from panel data

This study analyzes the effects of fiscal transparency and legal aspects on the perception of the control on corruption. Our argument is that fiscal transparency can reduce information asymmetry and, thus, the existing discretionary power of public officials, politicians and legislators. In addition, we also argue that fiscal transparency and a strong legal system might be able to increase the expected cost of corruption and, consequently, the deterrent effect against corruption, once it increases the probability of corrupt officials, politicians and legislators being caught, representing important aspects able to increase the perception of the control on corruption. Based on a sample of 82 countries for the period 2006-2014 and using panel data methodology, our study provides important practical implications in terms of anti-corruption policy guidelines since the results indicate that more transparent fiscal practices bring beneficial effects in terms of corruption perception. Moreover, the findings indicate that the effect of rule of law on the perception of the control on corruption becomes greater as fiscal transparency increases (the marginal effect of rule of law on this perception increases with fiscal transparency improvements). The findings also reveal that a strong legal system (represented by a strong rule of law, integrity of the legal system and impartial and effective courts that guarantee law enforcement) increases the perception of the control on corruption.

Automated summary

Fiscal transparency and a strong legal system can decrease corruption risk and enhance the perception of control on corruption by reducing information asymmetry and increasing the cost of corruption.