The Effect of Government Size and Democracy on Corruption in OPEC Members

The lack of consensus on the role of government size and democracy on corruption has caused it to remain unclear and unresolved. In order to remove these ambiguities، this paper examines the effect of government size، democracy and their interaction on corruption for OPEC members. In fact، it is expected that the effect of government size on corruption is dependent on the level of democracy. To achieve the stated objective، we used Dynamic Panel Data technique based on Generalized Method of Moment from 1996 to 2011. The result shows that government size with the coefficient of -. 30 leads to an increase in corruption and democracy with the coefficient of 1. 54 leads to a decrease in corruption، which represents a considerable role of democracy in reducing the level of corruption. In addition، the results show that the interaction effect of democracy and government size has a significant impact on the level of corruption. In other words، simultaneous increase of government size and democracy can reduce the level of corruption. Thereby the large government size provides stronger checks and monitoring over the institutions and an increase in the level of democracy via channels such as citizens’ participation in selecting their government and Parliament and free media provides accountability of authorities.