EU accession: A boon or bane for corruption?
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EU accession: A boon or bane for corruption? Vincenzo Alfano 1 & Salvatore Capasso 2 & Rajeev K. Goel 3,4 # Academy of Economics and Finance 2020
Abstract The formation and expansion of the European Union (EU) have attracted much attention. However, the impact on corruption in a nation after joining the Union has not been formally studied. Any nation that joins the European Union potentially faces two different and opposite effects on corruption. On the one hand, there are reasons to believe that corruption is going to decrease because of EU initiatives to fight corruption; on the other hand, there are reasons to imagine that corruption may increase due to the increase in bureaucracy and new regulations. Hence, the overall effect on corruption is not entirely clear. This work focuses on the last three rounds of EU entry and empirically studies the effects of joining the EU on corruption. Placing the analysis in the broader literature on the cross-national determinants of corruption, the results suggest that entry into the EU increases corruption. Another insight is that this corruption increase does not hold for nations that are potential EU entrants or that are in the negotiation stage. Keywords Corruption . Regulations . Free trade . European Union . Joining the EU . EU
negotiations . Government JEL Classification D73 . E60 . F68; K42
Comments by Dr. James Payne are appreciated. An earlier version of this paper was circulated as a CESifo working paper #8207.
* Rajeev K. Goel [email protected]
1
Institute for Studies on the Mediterranean ISMed – CNR, Naples, Italy
2
University of Napoli – Parthenope, ISMed - CNR and CSEF, Naples, Italy
3
Department of Economics, Illinois State University, Normal, IL 61790-4200, USA
4
Kiel Institute for the World Economy, Kiel, Germany
Journal of Economics and Finance
1 Introduction The formation of a trading and political block such as the European Union (EU) has had far-reaching ramifications for member nations (and their competitors); see Bickerton (2012). Many nations have joined the EU over time, with some others waiting to join (http://ec.europa.eu/). It may be argued that politicians in favour of joining the EU have espoused the economic benefits to motivate public opinion. However, some overall implications of joining, such as the impact on corruption, have not been analytically studied and are thus not very well understood. The composition of the EU has led to a formidable trading block with freedom of trade. An extensive literature studies the linkages between trade openness and corruption. Often, these studies identify a negative relationship between the degree of trade openness of a country and the level of corruption (Ades and Di Tella 1999; Krueger 1974; Larrain and Tavares 2007; Torrez 2002). Another common finding is that the size of the government is positively correlated with the level of corruption in a country (among others see Rose-Ackerman 1999; Svensson 2005). The explanation for these findings is intuitive: by nature, corruption captures econom
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