The Regulation of Political Finance and Corruption

Using the International Institute for Democracy and Electoral Assistance (IDEA) database on political finance regulations for 82 countries, we found that a contribution limits index increased corruption, after controlling for a standard list of explanatory variables. This result remains consistent employing an array of robustness checks intended to minimize the risk of a bias due to potential reverse causality and endogeneity. In contrast, the level of perceived corruption is lower in countries with higher indices of public funding and transparency requirements but these effects are rarely significant. Interestingly, we show that the mix of more generous public funding and less stringent regulations of private contributions is associated with lower corruption.