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The Role of Political Institutions in Combating Corruption And Catharina Groop Accountability and Corruption A Study into Political Institutions as Referees Between Principals and Agents Representative democracy is characterized by delegation of power. As a consequence, principal-agent relationships are established between citizens and their representatives, and beyond. Delegation of power from principals to agents has many advantages, but also involves risks in that agents may choose to disregard the wishes of | Accountability and Corruption | 2013 Catharina Groop Catharina Groop their principal. This may take the form of corruption, i.e. engagement in behaviour which deviates from the formal duties of a public role for personal benefit or that of family members, friends etc. This study regards political institutions as entities capable of solving Accountability and Corruption many of the problems between principals and agents, including A Study into Political Institutions as Referees Between cases whereby agents engage in corrupt practices. The study regards political institutions as problem-solvers in this respect, in that Principals and Agents they provide rules and procedures according to which principals can hold agents to account. Departing from the lines of accountability inherent to a number of political institutions, the study finds, however, that single political institutions tend to send a multitude of often contradictory signals with regards to accountability, at times enhancing accountability and at others hampering it. As a consequence, single political institutions also have reducing as well as increasing effects on levels of corruption. The study recognizes that institution-building does not constitute a panacea against corruption, and also analyses a number of other factors with a bearing on levels of corruption. These include individual leaders as well as their values, leadership styles, strategies, policy choices and contributions to institution-building. Åbo Akademi University Press | ISBN 978-951-765-694-8 Catharina Groop (born1973) Bachelor of Arts (Åbo Akademi University) 2000 Master of Social Sciences (Åbo Akademi University) 2001 Licentiate of Social Sciences (Åbo Akademi University) 2008 Åbo Akademi University Press Tavastgatan 13, FI-20500 Åbo, Finland Tel. +358 (0)2 215 3478 E-mail: [email protected] Sales and distribution: Åbo Akademi University Library Domkyrkogatan 2–4, FI-20500 Åbo, Finland Tel. +358 (0)2 -215 4190 E-mail: [email protected] ACCOUNTABILITY AND CORRUPTION Accountability and Corruption A Study into Political Institutions as Referees Between Principals and Agents Catharina Groop Åbo Akademis förlag | Åbo Akademi University Press Åbo, Finland, 2013 CIP Cataloguing in Publication Groop, Catharina. Accountability and corruption : a study into political institutions as referees between principals and agents / Catharina Groop. - Åbo : Åbo Akademi University Press, 2013. Diss.: Åbo Akademi University. ISBN 978-951-765-694-8 ISBN 978-951-765-694-8 ISBN 978-951-765-695-5 (digital) Painosalama Oy Åbo 2013 CONTENTS FOREWORD________________________________________________________________________ 9 LIST OF ABBREVIATIONS ______________________________________________________ 11 1 INTRODUCTION _______________________________________________________________ 13 1.1 The purpose of the thesis ________________________________________________ 14 1.2 Methods and data ________________________________________________________ 16 1.3 Structure of the remainder ______________________________________________ 19 2 CORRUPTION – A MULTIFACETED AND ELUSIVE PHENOMENON _______ 21 2.1 Definitions of corruption ________________________________________________ 21 2.1.1 Classical definitions _________________________________________________ 21 2.1.2 Behavioural definitions _____________________________________________ 22 2.1.2.1 Corruption as contrary to the rules and regulations of public office __________________________________________________________ 23 2.1.2.2 Corruption as contrary to the public opinion ________________ 24 2.1.2.3 Corruption as contrary to the public interest ________________ 25 2.1.2.4 Market-centred definitions ____________________________________ 25 2.1.2.5 Other definitions _______________________________________________ 26 2.1.3 Type of definition of corruption selected _________________________ 28 2.2 Operationalization of corruption _______________________________________ 39 2.2.1 Overview of data sources and their characteristics ______________ 40 2.2.1.1 Experience- and perceptions-based data ____________________ 40 2.2.1.2 Respondents ____________________________________________________ 42 2.2.1.3 Types of corruption captured _________________________________ 42 2.2.1.4 Sectors and contexts ___________________________________________ 43 2.2.1.5 Composite and non-composite sources ______________________ 43 2.2.2 Discussion ___________________________________________________________ 43 2.2.3 The Worldwide Governance Indicators (WGI) ___________________ 44 2.2.3.1 Features and structure ________________________________________ 44 2.2.3.2 Critique of the Worldwide Governance Indicators __________ 46 2.2.3.3 Discussion and choice of measure ____________________________ 54 3 SAFEGUARDING AGAINST CORRUPTION ___________________________________ 59 3.1 Delegation of power and its inherent risks _____________________________ 64 3.1.1 Delegation from principals to agents ______________________________ 65 3.1.2 Application of the principal-agent model in the field of political science _________________________________________________________ 67 3.1.3 Agency problems and corruption as a form of agency loss ______ 71 3.2 Political institutions as problem-solvers _______________________________ 74 3.2.1 Definition of a political institution _________________________________ 74 3.2.2 Entities categorized as political institutions ______________________ 77 3.2.3 Research into linkages between political institutions and corruption _____________________________________________________________ 79 3.2.3.1 Executives _______________________________________________________ 80 3.2.3.2 Legislatures _____________________________________________________ 83 3.2.3.3 Electoral systems _______________________________________________ 85 3.2.3.4 Vertical division of power _____________________________________ 89 3.2.3.5 Bureaucracies ___________________________________________________ 93 3.2.3.6 Anti-corruption commissions _________________________________ 95 3.2.4 Political institutions of interest to the thesis ______________________ 96 3.3 Solving problems of delegation through institution-building _________ 98 3.3.1 The importance of accountability __________________________________ 98 3.3.2 Accountability mechanisms _______________________________________ 101 3.3.2.1 Ex ante accountability mechanisms __________________________ 103 3.3.2.2 Ex post accountability mechanisms __________________________ 105 3.3.3 Accounting parties _________________________________________________ 107 4 QUANTITATIVE ANALYSIS OF THE LINKAGES BETWEEN POLITICAL INSTITUTIONS AND CORRUPTION ___________________________________________ 109 4.1 The corner stones of the analysis ______________________________________ 109 4.1.1 Countries included _________________________________________________ 109 4.1.2 Variables ____________________________________________________________ 111 4.1.2.1 Institutional variables _________________________________________ 111 4.1.2.2 Control variables ______________________________________________ 113 4.1.2.3 Dependent variable ___________________________________________ 116 4.2 The solidity of the analysis _____________________________________________ 116 4.2.1 The normality assumption _________________________________________ 117 4.2.2 The absence of heteroscedasticity ________________________________ 117 4.2.3 The linearity assumption __________________________________________ 118 4.2.4 The absence of auto-correlation __________________________________ 118 4.2.5 Collinearity and multicollinearity _________________________________ 118 4.3 The bivariate and multivariate regression analyses__________________ 120 4.4 Discussion regarding the results _______________________________________ 132 2 5 QUALITATIVE ANALYSIS OF THE LINKAGES BETWEEN POLITICAL INSTITUTIONS AND CORRUPTION ___________________________________________ 135 5.1. The rationale behind the qualitative case studies and the selection of cases _______________________________________________________________________ 135 5.2 Case study of Austria ___________________________________________________ 137 5.2.1 Corruption in Austria ______________________________________________ 138 5.2.1.1 Institutional arrangements to directly counteract corruption _____________________________________________________________ 138 5.2.1.2 Prevalence and forms of corruption in the Austrian context _________________________________________________________________ 141 5.2.1.3 History of corruption _________________________________________ 144 5.2.2 Politico-institutional lines of accountability and linkages to corruption _____________________________________________________________ 148 5.2.2.1. Lines of accountability inherent to the executive, and linkages to corruption ________________________________________________ 150 5.2.2.2 Lines of accountability inherent to the electoral system, and linkages to corruption ___________________________________________ 172 5.2.2.3 Lines of accountability inherent to the vertical distribution of
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