Decentralization, Transparency of Public Procurement and Corruption in MENA Countries

Abstract

This paper aims to study the impact of decentralization on corruption in the MENA region during the period 2001-2019. We adopt the model of Fisman and Gatti (2002) and use two econometric methods: the instrumental variable method and the system GMM method. Firstly, we show that decentralization in these economies favors rent-seeking behavior and cannot be a mechanism to fight against corruption. This result is robust for these two estimation methods and different corruption and decentralization indicators. Secondly, we introduce the base model, an interactive variable that links the decentralization indicator to that of transparency in public procurement. Likewise, we estimate this model by using the instrumental variable method and the system GMM method. We show that a threshold level of transparency in public procurement is necessary for successful decentralization and the reduction of corruption in MENA countries. This result is robust for the two estimation methods and different corruption and decentralization indicators.