Economic & Social Affairs DESA Working Paper No. 55 ST/ESA/2007/DWP/55 August 2007 Corruption and Democracy Michael T. Rock Michael T. Rock is Harvey Wexler Professor of Economics in the Department of Economics, Bryn Mawr College, 101 N. Merion Ave, Bryn Mawr, PA, USA 19010. E-mail: [email protected]. Comments should be addressed by e-mail to the author. Abstract What is the impact of democracy on corruption? In most models, analysts assume a negative rela- tionship, with more democracy leading to less corruption. But recent theoretical developments and case evidence support an inverted U relationship between corruption and democracy. By drawing on a panel data set covering a large number of countries between 1996 and 2003, substantial empiri- cal support is found for an inverted U relationship between democracy and corruption. e turning point in corruption occurs rather early in the life of new democracies and at rather low per capita incomes. JEL Classification: O12, D72, D73, H11, H77, K42 Keywords: corruption, electoral democracy, consolidated democracy, rule of law, government effectiveness