Democracy and Corruption Causality in Indonesia
Abstract
The objective of this study is to analyze the causality between democracy and corruption in Indonesia for the period of 1995 to 2017. This study perform a multivariate cointegration test with government expenditure as a control variable and cross-check this long-run relationship with an Autoregressive Distributed Lag (ARDL) model approach to cointegration beside multivariate approach proposed by Johansen & Juselius. The results show that there is cointegration among the variables specified in the model of corruption equation when government expenditure is taken into account. Indeed, for corruption and democracy to move together in the long run, they need to be associated with government expenditure. The tests for Granger Causality conducted show a long-run causality running from democracy and government expenditure to corruption. In other word, the democracy and government expenditure Granger cause corruption and not the reverse. In short-run, there is neutrality causation between democracy and corruption.
Keywords
Full Text:
PDFReferences
Acemoglu, D., Robinson, J. A. (2000). Democratization or repression? European Economic Review, 44(4), 683-693.
Ades, A., Tella, R. (1999). Rents, Competition and Corruption. American Economic Review, 89, 4, 982-94.
Afridzal, A., Abdullah, S., Saputra, M., Hasnawati, Fazella, D. (2019). Education Expenditure in Aceh Local Governments An Empirical Evidence from Aceh. Budapest International Research and Critics Institute-Journal (BIRCI-Journal), 2 (4), 334-343.
Ansari, T, S. (2019). State, BUMN (State Owned Enterprises - SOEs) and Role of Law in Economic Development: A Theoretical Approach. Britain International of Humanities and Social Sciences (BIoHS) Journal, 1(2), 20-29.
https://doi.org/10.33258/biohs.v1i2.32.
Delavallade, C. (2006). Corruption and Distribution of Public Spending in Developing Countries. Journal of Economics and Finance, 30 (2), 222-239.
Ferrin, M. (2016). An empirical assessment of satisfaction with democracy. In M. Ferrin & H. Kriesi (Eds.), How Europeans view and evaluate democracy (pp. 283–306). Oxford: Oxford University Press.
Fjelde, H., Hegre, H. (2014). Political corruption and institutional stability. Studies in Comparative International Development, 49(3), 267–299.
Gamir, A. F. (2015). Mapping High-Level Corruption Risks in Spanish Public Procurement. Retrieved from http://www.crcb.eu/wp-content/uploads/2015/02/Gamir_Corruption-in-Spanish-PP_v2_2015Feb.pdf.
Granger, C. W. J. (1969). Investigating Causal Relations by Econometric Models and Cross-spectral Methods. Econometrica, 37(3), 424–438. https://doi.org/10.2307/1912791.
Gupta S.- Luiz de M.- Raju S., (2000). Corruption and Military Spending. IMF (International Monetary Fund) Working Paper, 23: 1-31.
Halik, Suhendrayatna, Yurni, Irma., Halimah. (2020). The Effect of Administrative Implementation Principles towards the Effectiveness of Government Services. Budapest International Research and Critics Institute-Journal (BIRCI-Journal), 3 (1), 255-261.
Holmes, L. (2006). Rotten states? Corruption, post-communism, and neoliberalism. Durham: Duke Univ. Press.
Johansen, S., Juselius, K. (1990). Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money. Oxford Bulletin of Economics and Statistics, 52(2), 169–210. Retrieved from https://econpapers.repec.org/RePEc:bla:obuest:v:52:y:1990:i:2:p:169-210.
Johnston, M. (1996). The search for definitions: The vitality of politics and the issue of corruption. International Social Science Journal, 639-58
Jong-sung, Y., Khagram, S. (2005). A comparative study of inequality and corruption. American Sociological Review, 70(1), 136–157.
Kalenborn, C., & Lessmann, C. (2013). The impact of democracy and press freedom on corruption: Conditionality matters. Journal of Policy Modeling, 35(6), 857–886.
Kolstad, I., Wiig, A. (2016). Does democracy reduce corruption? Democratization, 23(7), 1198–1215.
Kubbe, I. (2015). Corruption in Europe: Is it all about democracy? Baden-Baden: Nomos Verlagsgesellschaft.
Li, H., Xu, L. C., & Zou, H. F. (2000). Corruption, Income Distribution, and Growth. Economics and Politics, 12, 155-182.
Lipset, S. M. (1998). George Washington and the Founding of Democracy. Journal of Democracy, 9(4), 24-38. Johns Hopkins University Press. Retrieved September 22, 2019, from Project MUSE database.
Mauro, P. (1996). The Effects of Corruption on Growth, Investment and Government Expenditure. IMF (International Monetary Fund) Working Paper, 98: 1-27.
Mauro, P. (1997). Why Worry About Corruption? International Monetary Fund Economic Issues, 6: 1-13.
Mauro, P. (1998). Corruption and the composition of government expenditure. Journal of Public Economics, 69 (2): 263–279.
McMann, K. M., Seim, B., Teorell, J. & Lindberg, S. I. (2017). Democracy and Corruption. A Global Time-Series Analysis with V-Dem Data. V-Dem Working Paper 2017:43. https://ssrn.com/abstract=2941979.
Mohtadi, H., & Roe, T. L. (2003). Democracy, rent seeking, public spending and growth. Journal of Public Economics, 87(3–4), 445–466.
Montinola, G. R., Jackman, R. W. (2002). Sources of corruption: A cross-country study. British Journal of Political Science, 32(1), 147–170.
Myerson, R. B. (1993). Effectiveness of electoral systems for reducing government corruption - a Game-Theoretic Analysis. Games and Economic Behavior, 5 (1), 118-132.
Olteanu, T. (2012). Korruption in der Demokratie. In T. Olteanu (Ed.), Korrupte Demokratie? (pp. 267–294). Wiesbaden: VS Verlag für Sozialwissenschaften.
Pesaran, H., J. Smith, R., & Shin, Y. (2001). Bound Testing Approaches to the Analysis of Level Relationship. Journal of Applied Econometrics (Vol. 16). https://doi.org/10.1002/jae.616.
Pesaran, M. H., & Shin, Y. (1999). An autoregressive distributed lag modelling approach to cointegration analysis, in Strom, S. (Ed.), paper presented at Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Cambridge University Press, Cambridge.
Rock, M. T. (2009). Corruption and democracy. The Journal of Development Studies, 45(1), 55–75.
Rose-Ackerman, S. (1999): Corruption and Government. Causes, Consequences and Reform. Cambridge: Cambridge University Press.
Rose-Ackerman, S. (2008). Corruption. In C. K. Rowley & F. G. Schneider (Eds.), Readings in public choice and Constitutional Political Economy (pp. 551–566). Boston: Springer US.
Seldadyo, H., De Haan, J. (2011). Is corruption really persistent? Pacific Economic Review, 16(2), 192–206.
Shen, C. (2005). Corruption, democracy, economic freedom, and state strength: A cross national analysis. International Journal of Comparative Sociology, 46(4), 327–345.
Sung, H.-E. (2004). Democracy and political corruption: A cross-national comparison. Crime, Law and Social Change, 41(2), 179–193.
Svensson, J. (2005). Eight Questions About Corruption. Journal of Economic Perspectives, 19 (3), 19-42.
Transparency International. (2016). What is Corruption? Retrieved from https://www.transparency.org/what-iscorruption/.
Transparency International. (2019). How Corruption Weakens Democracy. Retrieved from https://www.transparency.org/news/feature/cpi_2018_global_analysis.
Treisman, D. (2000). The causes of corruption: A cross-national study. Journal of Public Economics, 76(3), 399–457.
Treisman, D. (2007). What Have We Learned About the Causes of Corruption from Ten Years of Cross-National Empirical Research?. Annual Review of Political Science, 10, 211-244.
Uddin, G., Shahbaz, M., Arouri, M., & Teulon, F. (2014). Financial development and poverty reduction nexus: A cointegration and causality analysis in Bangladesh. Economic Modelling (Vol. 36). https://doi.org/10.1016/j.econmod.2013.09.049.
Ur Rehman, I., & Shahbaz, M. (2014). Multivariate-based Granger causality between financial deepening and poverty: the case of Pakistan. Quality & Quantity (Vol. 48). https://doi.org/10.1007/s11135-013-9952-z.
Uslaner, E. M., Rothstein, B. (2016). The historical roots of corruption: State building, economic inequality, and mass education. Comparative Politics, 48(2), 227–248.
Warren, M. E. (2004). What does corruption mean in a democracy? American Journal of Political Science, 48(2), 328–343.
Wei, S. (2000). How taxing is corruption on international investors? Review of Economics and Statistics, 52(1), 1-11. 10.1162/003465300558533.
DOI: https://doi.org/10.33258/birci.v3i3.1157
Article Metrics
Abstract view : 170 timesPDF - 115 times
Refbacks
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.