Corruption and Conflict: A CrossCountry Analysis

A Cross-Sectional Study on Lower Middle Income Countries Safwan A. Khan and Samavia Batool

Purpose of this study

Corruption on the forefront with the elections in most countries in the world. Despite having anti-corruption laws in place, why lower-middle income countries still rank high on corruption? Most countries where large-scale violent conflicts break out are also highly corrupt. Is there a plausible relation between the two? How are the two phenomena linked? What could be the other factors besides conflict that can explain corruption better?

Defining Corruption
Commonly defined as the abuse of public office for private gain (World Bank, 1997; UNDP, 1999). an act is commercially corrupt if a member of an organization uses his position, his rights to make decisions, his access to information, or other resources of the organization, to the advantage of a third party and thereby receives money or other economically valuable goods or services where either the payment itself or the services provided are illegal and/or against the organizations own aims or rules. (Rose Ackerman; 1978) Monetary as well as non-monetary abuse of entrusted power for private gain applying to both the public and private sectors. (Transparency International; 2012)

Defining Conflict
A situation in which two or more parties strive to acquire the same scarce resources at the same time.

Conflict is "an expressed struggle between at least two interdependent parties who perceive incompatible goals, scarce resources, and interference from others in achieving their goals. Wilmot and Hocker (2001)

Literature Review
Strong positive correlation between corruption and conflict; stronger at an aggregate regional level as compared to individual-country level (Le Billion, 2003; Mauro, 1995; Asongu, 2013) Corruption on one hand can sustain violent conflicts while on the other hand it can sustain peace too (Le Billion, 2003) Corruption and conflict as an outcome of modernization (Huntington, 1968) Exploitation of renewable resources leads to conflict (Rus, 2010)

Gaps in the Literature

No significant scoping on this subject in a global context No such study at the country-level Data constraints; no documentation
Perception survey as an only option? Non-comparable indicators of conflict

Data analysis
Zambia Yemen, Rep. Vietnam Uzbekistan Ukraine Swaziland Sudan Sri Lanka Senegal Philippines Paraguay Papua New Guinea Pakistan Nigeria Nicaragua Morocco Mongolia Moldova Lesotho Iraq India Indonesia Honduras Guatemala Ghana Georgia El Salvador Egypt, Arab Rep. Cte d'Ivoire Cameroon Bolivia Bhutan Armenia Albania

Corruption Perception Index Organized Conflict

Methodology
Data:
Lower-middle income economies ($1,026 to $4,035 GNI per capita), classified by World Bank 34 countries cross-sectional data for the year 2011

Issues in the data:

CPI :Ascending order (0: highly corrupt, 10: most clean) & GPIs indicators (0: low, 10: high) Negative sign was introduced with CPI. Thus (0: high level of corruption, -10: low level of corruption)

Variables
Variables Symbols Definition Type of indicator Source CPI 2011 score Cp The Corruption Perceptions Index ranks countries/territorie s based on how corrupt their public sector is perceived to be Qualitative scale 010: (0:highly corrupt, 10:very clean) Transparency international (TI)

Organized conflict (internal)

Oc

Assessment of the intensity of conflicts within the countries

Assessment of the level of perceived criminality in society Assessment of the accessibility of small arms and light weapons (SALW)

Perceived criminality in society

Pc

Quantitative scale 1Economist 5: (very low to very Intelligence Unit, via high) Global peace index (GPI) Quantitative scale 1- 12th UNODC Survey, 5: (very low to very via Global peace high) index (GPI)
Quantitative scale 1Economist 5: (very low to very Intelligence Unit, via high) Global peace index (GPI)

Access to weapon

Aw

Variables Political instability

Symbols Pi

Definition

Type of indicator

Source

Government effectiveness

Ge

This indicator Quantitative scale 1Economist aggregates 5 5: (very low to very Intelligence Unit, via questions on social high) Global peace index unrest, orderly (GPI) transfers, opposition stance, excessive executive authority, and an international tension sub-index captures Quantitative scale World governance perceptions of the 2.5- 2.5 (higher indicators, World quality of public values Bank services, the quality corresponding to of the civil service better governance) and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to such policies

Variables

Symbols

Definition

Type of indicator

Source

Control of corruption

Cc

Control of corruption captures perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as "capture" of the state by elites and private interests
based on purchasing power parity (PPP). PPP GDP is gross domestic product converted to international dollars using purchasing power parity rates

Quantitative scale 2.5- 2.5 (higher values corresponding to better governance)

World governance indicators, World Bank

Log of GDP per capita, PPP (constant 2005 international $)

Ycl

Logarithm

World governance indicators, World Bank

 Classification of variables:
Dependent variable Corruption perception index

Independent variables

Organized conflict, Corruption control, Access to weapons, Perceived criminality, Government effectiveness and Political instability

Control variable

GDP per capita

 Estimation:
Heteroscedasticity consistent ordinary Least Squares (OLS) estimation technique Jackknife Repeated Replication (JRR) for robust results

Empirical Analysis:
Regression result: Government effectiveness and corruption-control as significant variables Jackknife Repeated Replication estimation: Corruption-control as the only significant variable

Discussion
State of organized conflict in a country may be insignificant in terms of explaining Corruption Improvement in corruption control mechanisms and government effectiveness reduces the incidence of corruption Application of JRR; corruption control as the only significant variable Important implication for policy making; Effect of corruption-control mechanism is greater than government effectiveness

Policy recommendations
Tools for corruption control
Use of Information and Communication Technologies ICTs Effectiveness of government bodies Accountability of political leaders
Strengthening of institutional restraints on the exercise of power Devolution of power to sub-national level

Multi-stakeholder approach

Areas for further research

Need for the development of country specific indicators for both corruption and conflict More focus on quantitative research

Implications for Pakistan

Corruption-control as a significant variable; strong implications for Pakistan (Despite having numerous anti-corruption agencies, corruption remains highly institutionalized) Pakistan ranks high on both corruption as well as conflict. It would be interesting to see how the two variables may relate in the context of Pakistan

Thank You!