Rethinking public funding of parties and corruption: Confronting theoretical complexity and challenging measurement

Abstract

Does the provision of state subsidies to political parties reduce their involvement in corruption? Existing research provides inconclusive evidence on this relationship, perhaps because cross-national studies on public funding and corruption are often limited by regulation-based indexes of political financing and by very general corruption measures. In this study, we use focused measures for both phenomena to investigate whether more generous public funding reduces party corruption. Our independent variable reflects the actual cash amount of budgetary subventions provided to parties in twenty-seven post-communist countries. Our dependent variable of party-centered corruption represents the share of firms considerably affected by the informal payments made by businesses to political parties and parliamentarians to influence their decisions. We find that a higher level of state subsidies is associated with a reduction in corruption; its effect diminishes as funding increases, and its impact on corruption is lagged. However, there is a wide interval of uncertainty around these results. In the context of the existing literature, our contribution reduces the estimate of the size of a public funding effect and increases the level of uncertainty.