Does state funding of political parties deter political corruption? New insights from hard data

The provision of direct public funding (DPF) to political parties is assumed to be one of the key policy tools designed to reduce party dependence from private sources and to diminish the incentives to engage in corruption-prone transactions. As an anti-corruption tool, it is strongly endorsed by international organizations along with other policy instruments of the political financing regime (PFR) such as donation and spending limits, reporting, and disclosure requirements (Council of Europe, 2003; OECD, 2016; OSCE/ODIHR & Venice Commission, 2011). Despite this broadly shared assumption, cross-national empirical evidence provides mixed results. While some scholars found the provision of DPF to be negatively associated with corruption (Ben-Bassat & Dahan, 2015; Hummel et al., 2019), others came to the opposite conclusion (Abel van Es, 2016, p. 218; Bértoa et al., 2014, p. 366; Biezen & Kopecký, 2001; Casas-Zamora, 2005, p. 39; Evertsson, 2013; Fazekas & Cingolani, 2017; Lopez et al., 2017, pp. 27–28; Nassmacher, 2009, p. 143), or could not find consistent evidence in either direction (Biezen, 2010, p. 70; Norris, 2017, pp. 228–229). The key limitation of most research, however, stems from its reliance on the regulatory scope, operationalized as the presence vs. the lack of restrictions and/or entitlements across several dimensions of PFR. Consequently, regardless of whether PFR or DPF are used as independent or dependent variables, existing scholarship employs a dichotomous coding (absence vs. the availability of DPF) or composite regulatory indexes reflecting the amount/scope of regulation. Yet this methodological approach does not account for the cross-national variation or within-country variation over time in the amount of state funding, which might considerably affect the incentive structure of political parties to get engaged in illicit transactions. To overcome this limitation, this paper explores the relationship between state funding of political parties and political corruption by using an original dataset of the actual amount of state funding for party statutory (> 800 country–years observations) and election activities (225 country–elections observations) across 27 post-communist regimes from the outset of transition. It employs the DPF per voter as a benchmark to test whether a higher level of DPF allotted to parties deters political corruption, which is a far superior indicator to existing alternatives of DPF.