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Transparently corrupt? Changes in perceived corruption in low income countries following EITI membership

Democracy
Governance
Political Economy
International
Quantitative
Corruption
Ivar Kolstad
Norwegian School of Economics
Ivar Kolstad
Norwegian School of Economics

Abstract

We analyze the evolution of perceived corruption after countries join the Extractive Industries Transparency Initiative (EITI). Using country-year panel data and a corruption index that is comparable over time, we find no evidence that corruption is reduced in the years following EITI membership. On the contrary, there is evidence of an increase in corruption in low income autocratic countries subsequent to joining the initiative. These results hold for both standard difference-in-difference estimation, and for more sophisticated methods that address estimation challenges that arise when countries become EITI members at different times. We see no evidence that late-comers to the initiative have experienced more favourable corruption outcomes than early joiners. The increase in corruption in low income countries does not seem to be driven by increased foreign investment or aid. Instead, the increase appears to be driven by autocratic countries whose regimes rely on perfomance legitimation strategies to justify their continued hold on power. This is consistent with EITI accession being used as a signal of regime competence and legitimacy, permitting more extensive elite corrupt activity.