Effect of political corruption on municipal tax revenues

Abstract

Most research on corruption has been at the national level, because its study at the regional or local level is more complex. Although there are many studies about the relation between corruption and government spending, very few examine the influence of corruption on government revenues, and we have not found any at the subnational level, except the recent Liu & Mikesell (2019). Our aim is to analyze political corruption at the municipal level, studying whether the level of revenue of municipal governments is affected by the cases of corruption involving local politicians. Some of the other factors taken into account are political ideology, absolute majority government and the electoral cycle. The sample is a data panel of all the Spanish municipalities with a population of over 50,000 inhabitants for the period 2002-2013. Our results reveal that municipalities with higher levels of corruption have higher tax revenues in per capita terms.

Keywords

• political corruption
• local governments
• tax revenues