Democracy, Corruption and Unemployment: Empirical Evidence from Developing Countries

The literature on democracy and corruption is inconclusive on the effect of democracy on corruption. We intend to supplement this void by arguing that interaction between democracy and unemployment may exist in shaping the de facto corruption levels. This paper examines whether such conjuncture exists. We estimate a linear dynamic panel-data model using data from 80 developing countries over the period 1990–2018. We find that democracy reduces corruption. However, the potential beneficial effect of democracy on corruption is eroded by a higher unemployment rate. The results are robust and quantitatively similar across different empirical specifications. These results imply that developing countries should focus on decreasing the unemployment level so as to take advantage of democratization in their fight against corruption.