Corruption, federalism, and policy formation in the OECD: the case of energy policy

We investigate whether the effect of government corruption is conditional on a country's institutional structure. Federal systems have an additional layer of government, making lobbying relatively more costly. We investigate whether the effect of government corruption on environmental policy (in the form of restrictions on energy use) is conditional on a federal system being in place. Using 1982-96 data from 11 industry sectors in 12 OECD economies we find that while greater government corruption reduces the stringency of environmental policy, the effect declines in federal systems.

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