Although democracies are less corrupt than dictatorships on average, there are large variations among democracies. Part of the variation is explained by the age, or maturity of democracy. The question is what other than the maturity of democracy causes the differences in the effect of democracy on the control of corruption. I argue that the effect of democracy on corruption varies depending on the level of economic inequality. I propose two causal mechanisms.
First, Inequality increases both prevalence and persistence of clientelism, because the elite will have incentives to prevent the development of programmatic competition that will strengthen the demand for redistribution under high levels of inequality and the large proportion of the relatively poor population will be prone to clientelistic provision of particularistic benefits. Clientelism increases not only electoral corruption such as vote buying but also encourages bureaucratic corruption via patronage appointments in the bureaucracy and political corruption via increased need for clientelistic resources. Thus, elections as a mechanism for accountability do not function well under high inequality and can even have perverse effects.
Second, inequality increases the probability of capture by the powerful elite. Higher levels of inequality and skewness, which are strongly associated with each other, will increase redistributive pressures because the gap between median income and mean income will get larger as inequality increases and the median voter with presumably median income will demand higher redistribution. Hence, the wealthy will have incentives as well as ability to buy political influence through legal and illegal means to minimize redistribution. Thus, democratic policy process of responsiveness and accountability will be undermined by corruption and capture by the powerful private interests.
I will present cross-national evidence as well as evidence from a comparative historical analysis of Korea, Taiwan, and the Philippines.
