Electoral Institutions and Corruption in Campaign Finance

Margit Tavits
tavits@wustl.edu

Joshua D. Potter
jdpotter@wustl.edu

April 2012
Abstract Recent research has suggested, but left untested, an argument according to which as personal vote-seeking incentives increase and campaigns become more expensive to run, politicians will seek illegal campaign funds with higher probability. In this paper, we test this mechanism specically. We demonstrate that, while increasing illegal campaign contributions clearly results in increased perceptions of corruption more generally, electoral institutions are unable to explain either (a) the incidence of illegal campaign contributions or (b) the resulting level of perceived corruption. In an eort to explain the incidence of illegal campaign contributions, we advance a theory of clarity in campaign nance and demonstrate that although citizens are more likely to perceive corruption in institutional settings with greater clarity, clarity is in itself not sucient to curb corruption.1

Prepared for The Eects of District Magnitude Conference in Lisbon, Portugal, May 29-30, 2012. Please do not cite without the authors permission.

Introduction

What eect do electoral institutions have on political corruption? As the main linkage between voters and their representatives, elections serve as a potentially powerful check on the behaviors and actions of elected ocials (Fearon, 1999; Powell, 2004; Przeworski, Stokes and Manin, 1999). To the extent that voters can successfully identify which parties and politicians are responsible for certain policy outcomes, then we expect that self-interested politicians should cater to the interests of these voters (Anderson, 2000; Powell and Whitten, 1993; Tavits, 2007). As with policy outcomes, so with corruption. Simply holding elections at all has been found to signicantly reduce the level of corruption in a polity (Diamond and Plattner, 1993; Doig and Theobald, 2000) and an ever growing literature on variation in levels of corruption within democratic polities has begun to explore the impact that dierent types of electoral institutions have on corruption (Kunicov a and Rose-Ackerman, 2005; Persson and Tabellini, 2003; Tavits, 2007). As electoral institutions provide voters with greater clarity regarding who is responsible for corrupt practices, and, in turn, incentivize politicians to behave better, then we would expect to observe less corruption in these situations. Scholars have had a dicult time, however, in pinning down the specic constellation of electoral institutions under which we should observe the lowest levels of corruption. Some have argued that the electoral competition that emerges from permissive electoral rules should decrease corrupt practices. To this end, Persson, Tabellini and Trebbi (2001) and Persson and Tabellini (2003) argue that larger voting districts where highly proportionate outcomes result in fewer safe seats for incumbents induce greater competition for votes and thus incentivize politicians to check their behavior while in oce. Higher district magnitude, however, might also obscure who is at fault for corrupt practices by virtue of creating large coalitional governments and weakening the oppositions ability to speak as a unied voice in parliament (Davis, Camp and Coleman, 2004; Kunicov a and Rose-Ackerman, 2005; Potter and Tavits, 2011). Similarly, while closed list proportional representation systems free individual politicians from having to raise massive campaign war chests, they also when 2

compared to open lists centralize a partys decision-making power in the hands of a small coterie of party leaders who might be dicult for the voters to identify and remove from oce (Chang and Golden, 2006; Kunicov a and Rose-Ackerman, 2005; Lederman, Loayza and Soares, 2005). A recent and inuential article by Chang and Golden (2006) attempts to tackle these tradeos. By drawing on the idea that politicians in dierent types of electoral environments face diering incentives to cultivate their personal reputations rather than the reputations of their parties, Chang and Golden (2006) argue that not all campaigns are equally expensive to conduct. In particular, they argue, in proportional representation (PR) systems with closed lists, politicians face decreasing campaign expenses as district magnitude increases. By contrast, in PR systems with open lists, politicians face increasing costs of campaigning as district magnitude increases. These dierential costs hinge critically on the need of an individual candidate to distinguish himself either from his copartisans or from candidates belonging other political parties (Carey and Shugart, 1995; Shugart, Valdini and Suominen, 2005). As the electoral benet of cultivating ones own personal image declines, then so should the expense of campaigning; conversely, a greater need to dierentiate oneself from the eld of candidates results in more expensive campaigns. As this nancial burden increases, politicians who wouldnt otherwise be drawn toward illicit campaign contributions are now more willing to engage in such practices. Because the same set of incentives exists for all political candidates within the same country, these temptations to indulge in corrupt campaigning aggregate across politicians to the system level, where voters are bound to perceive higher levels of country-level corruption. To test their argument, then, Chang and Golden (2006) interact district magnitude with list type as their main explanatory variable and employ a country-level corruption perceptions index as their outcome variable. However, they leave untested the causal mechanism relating electoral institutions to country-level corruption namely, they do not test whether country-level corruption is specically being aected by institutions impact on politicians

proclivity to engage in the illicit solicitation of campaign funds. In this paper, we aim to do just that. First, we outline in greater detail the ways in which electoral institutions shape personal vote-seeking incentives and connect these incentives to the expense of campaigns and, by extension, the need to make resort to illicit campaign contributions. We employ a cross-national measure of the frequency of illegal contributions to political parties as our main explanatory variable for perceptions of system-level political corruption. Second after having found empirical support for this causal mechanism we back up one link in the theoretical chain and explore the extent to which district magnitude and list type combine to tell us something about the incidence of illegal contributions to political parties. Across multiple empirical specications, we nd, contrary to the argument advanced by Chang and Golden (2006), that these electoral institutional variables have no eect on campaign illegality. Third, left without an explanation for the variation we observe in campaign-level corruption, we develop a theory of clarity in campaign nance that explains this variation in terms of the transparency of the fundraising process. We nd that citizens are more likely to recognize corrupt fundraising practices when rules exist that regulate campaign nance and provide for the disclosure of funding sources. Fourth and nally, we conclude with a discussion that situates this paper in the broader framework of our on-going research.

Campaign Illegality and Corruption Perceptions

Money is fundamental in electoral politics. Whether a country provides for some level of public subsidization of political parties or whether it caps political parties campaign expenditures, the ability of politicians to successfully raise campaign funds matters to at least some extent in the vast majority of electoral democracies (Scarrow, 2007). The comparative literature to this end speaks volumes. Across a broad range of electoral institutional settings, comparative scholars have repeatedly unearthed evidence that raising and spending money during election campaigns improves parties and candidates odds at reelection. Although

this literature began in the American context (Gerber, 1998; Green and Krasno, 1988; Jacobson, 1980), the same results have turned up in institutional settings as diverse as Ireland (Benoit and Marsh, 2003), Japan (Cox and Thies, 2000), Belgium (Hooghe, Maddens and Noppe, 2006), South Korea (Shin et al., 2005), France (Palda and Palda, 1998), the United Kingdom (Johnston and Pattie, 1995), and Brazil (Samuels, 2001). What is not constant across these various countries, however, is the relative importance of campaign funds in winning an election. Indeed, Chang and Golden (2006) argue that various combinations of list type and district magnitude and the personal vote-seeking incentives they induce can tell us a great deal about the relative importance of campaign funds and, by extension, the lengths to which desperate politicians are willing to go in order to get them. Following the well-developed literature on personal vote-seeking behaviors developed by Cain, Ferejohn and Fiorina (1987), Carey and Shugart (1995) and Samuels (1999), the authors argue that increased intraparty competition should drive up the value for politicians of cultivating their own personal reputations rather than the more general reputation of the party to which they belong. List type and district magnitude interact in important ways to help determine the trade-o between these two types of reputations. In closed-list systems with low district magnitude where a vote for a party list is, eectively, a vote for its one or perhaps two candidates cultivating a personal vote is nearly akin to cultivating a party vote. Here, the value of personal vote-seeking is relatively high. As district magnitude increases in closed-list systems, however and as more and more candidates get placements on increasingly lengthy lists each party is now no longer identiable with just one or two politicians. Because voters cannot cast a vote below the level of the party, politicians should work to cultivate their own distinct reputations less often than in closed-list systems with low district magnitude. The relationship is opposite under open-lists systems. Namely, as district magnitude increases and the overall number of competitors (copartisan and otherwise) in a district increases the fact that voters can vote for specic individuals induces these candidates to work diligently to cultivate their personal reputations vis- a-vis the reputations

of their parties. How do candidates for political oce distinguish themselves from one another and build their personal reputations? In the legislative arena, of course, empirical work has demonstrated that parliamentarians break party ranks on legislative votes with greater frequency (Crisp et al., 2004; Haspel, Remington and Smith, 1998). Studies of personal vote-seeking incentives have also demonstrated that pork-barrel allocations to a sitting incumbents constituency can positively impact her personal reputation (Ames, 1995; Chang, 2005). It is not immediately clear how either behavior, however, would contribute to aggregate-level indicators of corruption more generally. While poor party discipline might adversely aect the ecient passage of legislation or hamper the governing coalition formation process (Carey, 2003; Giannetti and Benoit, 2009; Morgenstern, 2004) and while pork-barrel politicking might result in representational ties between voters and their elected ocials predicated more on clientelism than on party programs (Kitschelt, 2000; Kitschelt and Wilkinson, 2007), neither type of activity should by itself contribute to levels of corruption, per se. Rather, Chang and Golden (2006) argue that personal vote-seeking incentives should make a dierence in citizens perceptions of corruption at the level of the campaign; more specically, they argue that: in settings where incentives for the personal vote rise, candidates for public oce need larger baskets of individual campaign funds. They need money to advertise their individual candidacy (p. 119). In an eort to distinguish themselves not only from their copartisans but also from competing candidates from other parties, individual politicians must engage in a number of activities such as buying advertising time on television, printing and distributing campaign yers and posters, etc. As Chang and Golden (2006) note, all of these campaigning activities may tempt candidates to seek illegal campaign contributions, especially in contexts in which the abilities of individual candidates to raise campaign funds may be legally circumscribed in various ways (p. 120). Implicit in their argument is the assumption that more expensive campaigns generally translate into more corrupt campaigns. We think this logic requires

some qualication (after all, there are a number of other institutional and normative factors that shape politicians proclivities to engage in corrupt behaviors), but we grant these authors basic premise that at least the temptation to make resort to corrupt practices is perhaps signicantly exacerbated in the context of expensive campaigns. As Sajo (1998) has argued, we observe cross-nationally that campaign nance laws are increasingly subject to restrictive rules and the demand for more campaign spending is growing. Hence a turn to illegality becomes almost inevitable (p. 44).

2.1

Testing Personal Vote-Seeking Incentives

To test the hypothesis that increased frequency in illegal contributions to political parties should, in turn, increase aggregate-level perceptions of corruption, we rst turn to the widely utilized data set circulated by Treisman (2007) and collect data on 109 countries that satisfy a rather liberal denition of minimal democracy: if the country was listed as free by Freedom House in 2002 and 2003, it was automatically included in the data set; if it was listed as not free in those same years, it was automatically excluded; if it was listed as partially free in either year, we then turn to the countrys Polity IV scores and following Brancati (2008) and others include it if it scored above a 5 on this metric. We are most interested in the years 2002 and 2003, because these are the years covered by the data set we employ for our explanatory variable, illegal contributions to political campaigns. This variable comes from a survey question administered in the World Banks Global Competitiveness Report (GCR) editions 02/03 and 03/04 which asks more than 7,300 business leaders across a number of countries about the frequency of illegal donations to political parties. The index reports an average gure of all respondents and ranges from 1 (very common) to 7 (never occurs). The report only covers a subset of the 109 democracies collected from the Treisman data set. The outcome variable of interest perceived corruption has been operationalized as the two-year average during this time period of Transparency Internationals Corruption Perceptions Index (CPI) which is an averaged reporting of survey respondents answers to 7

questions about the extent of overall corruption in their country. This index ranges from 0 (highly corrupt) to 10 (not at all corrupt) and is one of the standard measurements of corruption perceptions utilized in studies of this type. For our other variables, we follow as closely as possible the operationalizations employed by Chang and Golden (2006). Our measure of district magnitude and open list are both based on variables that come from the Database of Political Institutions (DPI) described in Beck et al. (2001). District magnitude equals the DPI variable mdmh in 2003, which is the weighted average of the number of representatives elected by each constituency size. This measure is convenient in that it averages district magnitudes across tiers in mixed-member systems while also weighting the relative proportion of the two types of districts. Our open list indicator is simply the reverse coding of the DPIs cl variable, which indicates whether or not a list is closed when the electoral system is proportional representation.2 We also include several control variables that have become commonplace in studies of corruption perceptions. For these variables, we draw from both the DPI as well as the database Democratic Electoral Systems Around the World, 1946-2000 (DESW) collected and managed by Golder (2005).3 First, is whether or not a country is parliamentary. We draw on the institution variable from Golder and recode it slightly to correspond with the values presented in Chang and Golden (2006): this variable takes the value of 3 for parliamentary systems, 2 for mixed systems, and 1 for presidential systems. We also control for the eective number of legislative parties as drawn from Golder, who employs a corrective formula that accounts for vote shares going to smaller parties that get reported as a disaggregated other
In some specications of our models, which we describe below, we also code as closed lists those electoral systems that make use of plurality rules in single-member districts. In these cases, in terms of the schema developed by Carey and Shugart (1995), we have no pooling of votes across parties, voters casting their single vote at the party level, and party leaders presenting a xed ballot which voters may not alter. This is a situation that Carey and Shugart (1995) describe as closed-list plurality. In our models, we code these SMD cases with district magnitude of one and closed-list. These cases are excluded from models intended to replicate the ndings of Chang and Golden (2006), obviously, as these authors only test cases that make use of proportional representation. For variables drawn from Golder, we include values from 2000, which is the last year in his data set, but the closest to the time period in which we are interested. This is less than ideal, but the DESW has some distinct advantages over the DPI especially when it comes to institutional coding discrepancies.
3 2

category in ocial election records. A number of other covariates have been found to have a consistent eect on corruption perceptions. These are the percentage of the population that identies as Protestant, which we take from Treisman (2007); the age of the democratic regime, which we measure in years and take from the DPI; whether or not the country is a federal system and whether or not it is a former British colony, both as they are measured by Treisman (2007); and two economic variables, both taken from the World Banks data tables for the year 2003 a proxy of economic development (log of GDP per capita ) and a proxy of a countrys openness to trade (the amount of imports of goods and services as a percentage of the countys overall GDP). In the empirical investigations that follow, we pursue the same strategy repeatedly. First, we replicate the model specications employed by Chang and Golden (2006) using only, from what we can gather, the countries that they include in their analysis. Second, we employ the same model specication, but include the broader set of democracies for which we collected data (including those plurality systems that we treat as closed lists with district magnitudes of one). Third, we insert into these models our main explanatory variable of interest before, fourth, deleting their electoral institutional variables altogether and relying only on our explanation. Across many model specications, we return consistent evidence that district magnitude, list type, and their interaction do not explain variation in countrylevel corruption or campaign-level corruption. Interestingly, however, the causal mechanism that drives their theoretical story holds up rather well: increased corruption at the level of the campaign does indeed drive up perceptions of corruption at the country level. We rst explore this phenomenon with a battery of OLS regression models presented in Table 1. [Insert Table 1 About Here] Our Model 1 replicates Chang and Goldens Model 2 in Table 1 of their article, where they outline a purely electoral institutional model to explain variation in Transparency Internationals CPI index.4 Not only are none of the coecients statistically signicant, but
4

Note that our N in this regression is 41 and theirs is 39. We simply included all of the countries they

their signs are all opposite from what appears in their Model 3; furthermore, the explained variance from this model is exceedingly small. Recall that Chang and Golden are employing values from the 1996-1998 time period while we are chiey employing values (for the same variables) from the 2002-2003 time period. At any rate, the relationship does not appear to be robust to dierent time periods for the set of countries that they include in their analysis. Our Model 2 is a replicated version of their Model 5, which is their main explanatory regression with full inclusion of important control variables.5 In our Model 3, we rely on the same model specication, but now include the broader set of democracies for which we have complete data. Note that the story remains the same: district magnitude, list type, and their interaction continue to underperform. But what of the causal mechanism described by Chang and Golden (2006), i.e the argument that increases in illegal campaign contributions result in increases in perceived countrylevel corruption? In Models 4 and 5, we include our measure of illegal contributions to political parties, rst in the presence of the electoral institutional variables and, second, in their absence. Clearly this variable is a powerful predictor of corruption perceptions. As illegal contributions become less frequent (in other words, as the GCR index increases toward its max of 7), then the CPI index indicates less corruption (in other words, increases toward its max of 10). Not only does including this variable buy us more explanatory variance, it also more than makes up for eliminating the institutional variables altogether (note the identical adjusted R2 values between Models 4 and 5). In actuality, however, Chang and Golden never argue that campaign contributions and electoral institutions should be entered additively into models predicting variation in corruption perceptions. Rather, their theory argues that institutions impact the frequency of illegal contributions which, in turn, impact perceptions of corruption at the aggregate level. In the next section, we back up one step in the causal chain and take illegal campaign contributions as our dependent variable.
list in their appendix, of which there are 42 (one of our cases is dropped due to missingness). Here again, weve restricted ourselves to the countries included in the appendix of their article, but our N comes to 38 while theirs is 32.
5

10

Electoral Institutions and Campaign Illegality

If the theory articulated by Chang and Golden (2006) holds, we should expect that, as personal vote-seeking incentives increase in open list systems as district magnitude increases, campaigns should become more expensive to run and, by extension, politicians should have to rely more frequently on illegal campaign contributions. We nd weak support for this argument in Model 1 of Table 2, where we include only those cases utilized in their study. The coecients in this model are correctly signed, but fail to achieve conventional levels of statistical signicance. When we expand the data set to include a broader set of democracies (Model 2), all of the coecients actually reverse their signs and, again, fail to achieve statistical signicance. In Model 3, we drop the electoral institutional variables altogether and actually manage to improve the amount of explained variance in their absence. The canonical determinants of country-level corruption perceptions (i.e. Protestantism and democratic and economic development) also appear to be statistically robust predictors of campaign-level corruption as well. Why do we nd null results when it comes to explaining variation in illegal campaign contributions with electoral institutional variables? We believe that we can account for the lack of statistically signicant results with two explanations. Recall, rstly, that our measure of campaign illegality is very highly correlated with our measure of system-level corruption perceptions (with r = 0.9). It may well be the case that both of these indices are simply tapping into the same latent idea namely, that if a country is corrupt, its corrupt all the way down. Treisman (2007) notes that many of these cross-national indices actually track very closely with one another regardless of whether citizens and experts are being asked about the level of corruption in the bureaucracy, the party system, the country as a whole, etc. In such corrupt environments, then, we think that politicians incentives to cultivate their personal reputation probably fall far behind other incentives such as personal enrichment or directly rewarding their political supporters.

11

[Insert Table 2 About Here] In a country where corruption is the sine qua non of political life, politicians may solicit illegal campaign contributions as a matter of form rather than as something inuenced by institutional context. Considering the fact that our empirical analysis indicates that typically robust predictors of system-level corruption are also robust predictors of campaign-level corruption (i.e. Protestant norms, older democracies, and economically better developed countries), it seems that the story has very little to do with electoral institutions at all. If politicians operate in a generally corrupt political setting, then we would have no reason to expect that their behavior should be any dierent in the campaign than it is in the legislature. A second factor that might explain the null result and this is a point that we will elaborate in much greater detail in the following section is something that Chang and Golden (2006) do not take into account in their causal story: engaging in corruption is not always costless. In other words, although more money might lead to better electoral prospects, it can also mar a politicians reputation if voters discover that he has illegally undertaken its procurement. The analysis by Hooghe, Maddens and Noppe (2006) has recently made clear that the incentive structure put in place by electoral rules is often altered when we consider campaign nance regulations as well. Whether or not the campaign is expensive to run, the presence of, for example, donor disclosure laws, might dampen any theorized institutional eects. It is to this second point that we now turn.

Clarity in Campaign Financing

Voters care about policy outcomes and, to the extent possible, will vote for parties they believe will bring about their most preferred policies. If their choice of party has failed them in bringing about preferable policy outcomes in this electoral cycle, then they will decide to support a dierent party in the next election. The theoretical and empirical validity of this argument has been successfully demonstrated (with some institutional provisos) time and 12

time again in scholarship on retrospective accountability and economic voting (Anderson, 2000; Kiewiet, 2000; Powell, 2000; Powell and Whitten, 1993; Samuels, 2004). Przeworski, Stokes and Manin (1999) argue, however, that this accountability relationship is not merely conned to the economic realm and that voters if they can determine which individuals or parties are responsible for which decisions will aim to hold politicians accountable across a much broader range of policy areas. A raft of recent scholarship has argued that corruption is one such governmental outcome that voters might plausibly take into their balloting decisions (Gingerich, 2009; Nyblade and Reed, 2008; Pereira, Melo and Figueiredo, 2009; Tavits, 2007).6 Furthermore, these authors argue that certain constellations of political institutions will either improve or lessen voters ability to identify and, subsequently, punish incumbent politicians for corrupt behaviors. When institutions create clarity of responsibility for the outputs of government, we would expect voters to make use of this information in casting their votes (Powell and Whitten, 1993; Tavits, 2007). Ceteris paribus, we assume that voters would rather have clean representatives in elected oce than corrupt ones; to the extent that they can identify who the corrupt politicians are, we would expect these incumbents to be thrown out of oce. In the aggregate, then, we would expect self-interested politicians in high clarity environments to read the writing on the wall and improve their behavior so as to avoid punishment at the ballot box. While empirical scholarship has tended to examine this relationship at the national level (Potter and Tavits, 2011), we have reason to expect that clarity in the relationship between voters and politicians will reduce corruption at the level of the election
Note that the ndings of these studies suggest that voters are actually taking corruption into account in their voting decisions and punish corrupt behavior. Indeed, surveys around the world indicate that people perceive governmental corruption as a harmful and undesirable outcome. This is the case even in societies where corruption is endemic and people not only experience it on a regular basis but may even benet from it in certain instances (Persson, Rothstein and Teorell, 2010). For example, over 60 percent of Africans citizens of countries suering from widespread corruption and clientelism regard corruption by public ocials as wrong and punishable (Afrobarometer, 2006). Furthermore, evidence from the U.S. context also suggests that voters punish incumbents who were charged with corruption: on average, a corruption allegation cost an incumbent about 10 per cent of the vote and led to electoral defeat in 25 per cent of the cases (Welch and Hibbing, 1997). Overall, we believe that it is safe to assume that corruption is an electorally salient issue.
6

13

campaign as well. An electoral campaign is, after all, the most immediate form of interaction between voters and their representatives and, should politicians engage in corruption at this level, voters should be particularly reticent to support corrupt politicians (that is, if the voters have some way of detecting illegal practices in the rst place). We think that this possibility of detection introduces a serious tradeo for politicians when deliberating whether or not to engage in illegality in campaigning: as campaigns become more expensive, of course politicians face greater temptations to engage in illegal solicitations of funds; but, at the same time, when clarity in campaign nance increases, we expect that these temptations are seriously curbed. When politicians must disclose to the public where their donations originate, for example, or must disclose specics about how much money they spent in the campaign, then voters, when they perceive information along these lines that grates against their democratic sensibilities, should punish accordingly. Rather than arguing that the relationship between perceptions of campaign-level corruption and voters casting ballots for dierent, presumably cleaner parties and candidates is automatic, we instead simply argue that a candidates perceived level of corruption is one of many factors that become internalized in a voters choice on the ballot. Voters are, after all, chiey motivated by policy outcomes. Additionally, we know from the literature on strategic voting that they prefer not to waste their votes by casting ballots in favor of nonviable candidates. To the extent that voters have access to information about corruption at all (as they do in the type of high clarity situation weve described above) and to the extent that enough of them make their balloting decisions taking into account this information, then we expect that self-interested politicians should take some notice. On balance, increasing clarity in campaign nance should also increase the number of voters who take into consideration the extent of campaign illegality when casting their votes and, in turn, increase the number of politicians who curb their behavior to cater to the set of voters who undergo this evaluation. In the end, then, increasing clarity in campaign nance should result in decreased perceptions of campaign-level corruption.

14

This conclusion is in line with the expectations of scholars studying the eects of campaign nance regulation and policy-makers advocating for such rules. Indeed, regulation of the nancing of political parties is usually introduced with the specic goal of reducing public perceptions of corruption and seen as a remedy for corrupt campaign strategies both in the U.S. and comparative context (Hibbing and Theiss-Morse, 1995; Primo and Milyo, 2006; Roper, 2002; Thompson, 1995; van Biezen and Kopeck y, 2007; Weber, 1999). Many ethics and campaign nance statutes in the U.S., for example, include a statement that these laws enhance citizens beliefs in clean government (Primo and Milyo, 2006; Rosenson, 2009). The causal mechanism that we articulate here provides a theoretical rationale for these widely shared expectations.

Testing Clarity in Campaign Finance

In order to construct our additive metric of clarity in campaign nance in as principled a fashion as possible, we evaluated many of the questions that were asked by the researchers who put together the Funding of Political Parties and Election Campaigns database at the International Institute for Democracy and Electoral Assistance (IDEA) and evaluated the extent to which dierent combinations of these questions tapped into the latent (and inherently unmeasurable) concept of clarity. In particular, we focused on the following three dichotomous yes/no questions: (1) Is there a system of regulation for the nancing of political parties? (2) Is there provision for disclosure of contributions to political parties? and (3) Is there provision for public disclosure of expenditure by political parties? In an eort to construct a measure of the internal consistency of these three questions, we turned to the eld of psychometric testing, which has pioneered a number of measures of internal reliability. One such metric for questions that can assume continuous values is the widely-utilized Crombachs alpha (Cortina, 1993) and, in the specic case of variables with dichotomous outcomes, its derivative a metric that is known as the Kuder-Richardson Formula 20, or KR20 (Kuder

15

and Richardson, 1937). These measures of internal consistency have seen recent application in various subelds of political science (Rahn, Aldrich and Borgida, 1994; Rohrschneider and Loveless, 2010) and can calculated in general form by: K 1 K 1
N i=1 (Xi K i=1 pi qi 2 X

KR20 =

2 X

)2 X

Where K is the length of the test (in this case K =3 questions), N is the number of test takers (in our case, countries), pi is the proportion of yes responses to our three
2 questions, qi is the proportion of no responses, and X is the variance across specic

question responses Xi . In this way, KR20 gives us an estimate of the internal consistency of a battery of questions that is bounded by 0 and 1. In the eld of psychometric testing, values of 0.8 or higher indicate that a battery of questions is an acceptable proxy for measuring a single latent concept. Studies of political science have typically relied on consistency values between 0.6 and 0.8 (Rahn, Aldrich and Borgida, 1994; Rohrschneider and Loveless, 2010). Across our countries and for these three particular questions, the internal consistency of our clarity metric is slightly larger than 0.9. Our main explanatory variable, then, is clarity in campaign nance and is an additive measure that ranges from 0 (no clarity) to 3 (high clarity). Our expectations are that increasing clarity in the campaign nance regulations should decrease the level of perceived corruption at the campaign-level. In the models that we present in Table 3 below, we include only those variables for which we have some theoretical expectation that they might impact campaign-level corruption (specically, we have deleted our previous variables of federalism, parliamentarism, eective number of parties, and trade openness). It might be argued that there is a potential endogeneity problem in our causal argument; in other words, it might be the case that countries with certain levels of preexisting corruption

16

adopt certain institutional determinants of clarity in campaign nance. This is a salient concern to raise, but the direction of the impact is unclear: do more corrupt countries adopt institutions with greater clarity in an eort to clean up their act7 (perhaps responding to inducements oered by international monitoring organizations) (van Biezen and Kopeck y, 2007) or, by contrast, do more corrupt countries adopt institutions with lesser clarity so that they might continue to engage in their malfeasant activities? As it turns out, with our particular subset of democracies, the endogeneity problem is empirically irrelevant. We averaged the CPI country-level values for the three years leading up to our investigative period of 2003 and found that they are not at all correlated with our additive measure of clarity (r = 0.005). Even still, because we know that previous levels of corruption inuence current levels of corruption, we include this lagged average of corruption perceptions in the models that follow. If clarity ends up exerting a statistically signicant impact on campaignlevel corruption while controlling for previous levels of corruption, then this will be a truly robust nding.8 [Insert Table 1 About Here] In fact, we nd just that across the dierent model specications we report in Table 3. As before, the rst model includes only those cases utilized by Chang and Golden (2006). This model has impressive explanatory power and it holds up well when we include our broader set of democracies in Model 2. Dropping the electoral institutional values from the specication of Model 3 does not curtail claritys substantial impact, nor does it reduce the amount of variance we are able to explain. Curiously, however, the coecient on clarity in campaign nance is in the opposite direction that we would predict, i.e. as clarity increases, business leaders perceive a higher incidence of illegal contributions to political parties. Depending on which model we utilize and holding other variables constant moving across our observed
7 8

Witko (2007) argues this to be the case in the U.S. context.

The results continue to hold when the lagged average of corruption perceptions is removed from the analysis.

17

values on the additive scale of clarity would result in a shift down the GCR metric (i.e. toward more illegal contributions) of roughly 1 point. Substantively speaking, this is the amount of space that separates the GCR scores of, say, Denmark from Tunisia or, say, France from Thailand. Although the variables impact operates in the opposite direction from what we would hypothesize, clearly we are registering an important trend here. In our concluding section, we discuss this counterintuitive nding and outline how we intend to explore it further in our future research.

Conclusion and Future Research

We began this article by asking about the link between electoral institutions and aggregatelevel measures of political corruption. One very important article in this eld of study has suggested a theoretical story that begins with the incentives institutions create for individual politicians and ends with predictions about perceived corruption at the level of the country (Chang and Golden, 2006). The specic causal argument links an increase in the value of personal-vote seeking to an increase in the expense of campaigning and a greater need to provide pork-barrel projects for ones constituents; regardless of the broader set of norms and institutional checks in society, when politicians depend more on money to win elections, they become more desperate in their solicitations. Other things being equal, this should result in a higher incidence of illegal campaign contributions to parties and, in the aggregate, higher levels of perceived corruption in the country more generally. Our test of this causal chain is not perfect, but we have tried to do justice to the argument itself, which we nd a priori plausible and compelling. Empirically, we nd support for the untested causal mechanism that Chang and Golden (2006) describe: namely, that as the incidence of illegal donations to parties increases, so too does corruption in the aggregate. Backing up one step earlier in the causal chain, however, yields disappointing results: it appears that the variation we observe in illegal donations to political parties has very little to

18

do with the personal vote-seeking incentives generated by the interaction of district magnitude and list type. Rather, it seems that the more traditional determinants of country-level corruption (i.e. Protestant norms and economic and democratic development) are also the more powerful predictors of campaign-level corruption. Left casting about for an explanation, we turn to the literatures on economic voting and clarity of responsibility to develop a theory of clarity in campaign nance. We believe that this is a productive rst step in the literature on campaign nance reform, which is a eld of research that has been described by some of its greatest practitioners as theoretically underdeveloped (Nassmacher, 1993; Scarrow, 2007). Our argument is that, should campaign nance be regulated and made more transparent, voters ought to use this information to inform their perceptions of politicians corruptness. To the extent that voters then internalize this information with their vote choice and, subsequently, punish corrupt politicians at the ballot box, then we should observe less corruption at the level of campaigns in the presence of regulations that oer voters more clarity. Our empirical analysis indicates that this story is partially accurate. Increased clarity results in an increased perception of the frequency of illegal campaign contributions. One way to interpret this is that clarity in campaign nance is likely to serve its intended purpose of informing the public about any illegal campaign activities. Indeed, a handful of empirical studies about the eects of campaign nance regulation in the U.S. context reach a similar conclusion: stronger campaign nance laws have been associated with increased perceptions of corruption (Rosenson, 2009) and public cynicism (Gross and Goidel, 2003). This is argued to result from the increase in available information about the misconduct of political parties and candidates in settings where regulations have been adopted. For example, Primo and Milyo (2006) demonstrate modest improvements in peoples sense of ecacy from party funding disclosure laws and argue that such laws provide citizens with the necessary information to be better citizens (p. 35). Under conditions of greater clarity in campaign nance it is likely that the media will report on more violations, there is more talk about public

19

ocials amassing illegal funds (Rosenson, 2009), and perceptions of campaign corruption become more widespread as a result (Montinola and Jackman, 2002). What is curious, however, is that increased perceptions of corruption do not seem to incentivize politicians to subsequently change their behavior. Or, at least, any such change is not reected in reduced levels of campaign corruption. To some extent, our analysis is hamstrung by a lack of longitudinal data; we can imagine a scenario where it takes multiple iterations of voters punishing incumbent politicians before they get the message and begin to change the way they go about funding their campaigns. We are also limited to using perceptions rather than actual instances of corruption. It is possible that actual corruption has deceased as a result of increased clarity of campaign nancing. The fewer instances of corruption may simply be getting a lot more coverage because these instances are easier to detect. Getting accurate data on actual campaign corruption across countries and/or over time is a challenge in its own right. Furthermore, such data, even if obtained, are likely to reect the bias in reporting mentioned above and, therefore, unlikely to give us accurate answers. Perhaps a more straightforward explanation for this negative coecient, however, is this: illegal campaign contributions buy politicians more votes than the number of votes they lose by virtue of appearing corrupt to voters. In other words, the advantages of breaking the rules may far outweigh the costs. We believe this tradeo is the locus of additional work on campaign nance as it relates to political corruption. Specically due to the inherent diculties in collecting observational data of the sort that we would need to test this tradeo we are working on a laboratory experiment whereby voters and politicians interact in an environment where corrupt practices are either easy or dicult to detect. We are interested in the tradeo in votes and money from the politicians perspective as well as the tradeo in policy outcomes and clean government from the voters perspective. We expect that in some mock institutional scenarios, politicians will value illegal contributions more than the small number of votes they might lose by virtue of being perceived as corrupt.

20

Additionally, we expect that voters will make their balloting decisions based on a mix of ideological proximity to the candidates as well as their impressions of the candidates levels of corruption. In the end, we hope that this will be a productive contribution to the edging comparative literature on campaign nance regulations as well as the much better-developed literature on the determinants of political corruption.

21

References
Afrobarometer. 2006. The Status of Democracy, 2005-2006: Findings from Afrobarometer Round 3 for 18 Countries. Afrobarometer Brieng Paper 40:113. Ames, Barry. 1995. Electoral Rules, Constituency Pressures, and Pork Barrel: Bases of Voting in the Brazilian Congress. Journal of Politics 57(2):324343. Anderson, Christopher J. 2000. Economic Voting and Political Context: A Comparative Perspective. Electoral Studies 19(1):151170. Beck, Thorsten, George Clark, Alberto Gro, Philip Keefer and Patrick Walsh. 2001. New Tools in Comparative Political Economy: The Database of Political Institutions. World Bank Economic Review 15:165176. Benoit, Kenneth and Michael Marsh. 2003. For a Few Euros More: Campaign Spending Eects in the Irish Local Elections of 1999. Party Politics 9(5):561582. Brancati, Dawn. 2008. The Origins and Strengths of Regional Parties. British Journal of Political Science 38(1):135159. Cain, Bruce, John Ferejohn and Morris Fiorina. 1987. The Personal Vote: Constituency Service and Electoral Independence. Cambridge, MA: Harvard University Press. Carey, John M. 2003. Discipline, Accountability, and Legislative Voting in Latin America. Comparative Politics 35(2):191211. Carey, John M and Matthew Soberg Shugart. 1995. Incentives to Cultivate a Personal Vote: a Rank Ordering of Electoral Formulas. Electoral Studies 14(4):417439. Chang, Eric C. C. 2005. Electoral Incentives for Political Corruption Under Open-List Proportional Representation. The Journal of Politics 67(3):716730. Chang, Eric C. C. and Miriam A. Golden. 2006. Electoral Systems, District Magnitude, and Corruption. British Journal of Political Science 37:115137. Cortina, Jose M. 1993. What is Coecient Alpha? An Examination of Theory and Applications. Journal of Applied Psychology 78(1):98104. Cox, Gary F. and Michael F. Thies. 2000. How Much Does Money Matter?: Buying Votes in Japan, 1967-1990. Comparative Political Studies 33(1):3757. Crisp, Brian F., Maria C. Escobar-Lemmon, Bradford S. Jones, Mark P. Jones and Michelle M. Taylor-Robinson. 2004. Electoral Incentives and Legislative Representation in Six Presidential Democracies. The Journal of Politics 66(3):823846. Davis, Charles L., Roderic Ai Camp and Kenneth M. Coleman. 2004. The Inuence of Party Systems on Citizens Perceptions of Corruption and Electoral Response in Latin America. Comparative Political Studies 37(6):677703. 22

Diamond, Larry and Mark F. Plattner. 1993. The Global Resurgence of Democracy. Baltimore, MD: Johns Hopkins University Press. Doig, Alan and Robin Theobald, eds. 2000. Corruption and Democratisation. Portland, OR: Frank Cass. Fearon, James. 1999. Electoral Accountability and the Control of Politics: Selecting Good Types vs. Sanctioning Poor Performance. In Democracy, Accountability, and Representation, ed. Adam Przeworski, Susan C. Stokes and Bernard Manin. Cambridge University Press. Gerber, Alan S. 1998. Estimating the Eect of Campaign Spending on Senate Election Outcomes Using Instrumental Variables. American Political Science Review 92:401412. Giannetti, Daniela and Kenneth Benoit. 2009. Intra-Party Politics and Coalition Governments. Routledge. Gingerich, Daniel W. 2009. Corruption and Political Decay: Evidence from Bolivia. Quarterly Journal of Political Science 4:134. Golder, Matt. 2005. Democratic Electoral Systems Around the World, 1946-2000. Electoral Studies 24:103121. Green, Donald P. and Jonathan S. Krasno. 1988. Salvation for the Spendthrift Incumbent: Reestimating the Eects of Campaign Spending in House Elections. American Journal of Political Science 32:884907. Gross, Donald A. and Robert K. Goidel. 2003. The States of Campaign Finance Reform. Ohio State University Press. Haspel, Moshe, Thomas F. Remington and Steven S. Smith. 1998. Electoral Institutions and Party Cohesion in the Russian Duma. Journal of Politics 60(2):417439. Hibbing, John R. and Elizabeth Theiss-Morse. 1995. Congress as Public Enemy: Public Attitudes Toward American Political Institutions. Cambridge University Press. Hooghe, Marc, Bart Maddens and Jo Noppe. 2006. Why Parties Adapt: Electoral Reform, Party Finance, and Party Strategy in Belgium. Electoral Studies 25:351368. Jacobson, G. C. 1980. Money in Congressional Elections. New Haven: Yale University Press. Johnston, Ron J. and Charles J. Pattie. 1995. The Impact of Spending on Party Constituency Campaigns in Recent British General Elections. Party Politics 1:261273. Kiewiet, Roderick D. 2000. Economic Retrospective Voting and Incentives for Policymaking. Electoral Studies 19(2-3):427444. Kitschelt, Herbert. 2000. Linkages Between Citizens and Politicians in Democratic Polities. Comparative Political Studies 33(6/7):845879. 23

Kitschelt, Herbert and Steve Wilkinson, eds. 2007. Patrons, Clients, and Policies. Cambridge University Press. Kuder, G. F. and M. W. Richardson. 1937. The Theory of the Estimation of Test Reliability. Psychometrika 2(3):151160. Kunicov a, Jana and Susan Rose-Ackerman. 2005. Electoral Rules and Constitutional Structures as Constraints on Corruption. British Journal of Political Science 35:573606. Lederman, Daniel, Norman Loayza and Rodrigo Soares. 2005. Accountability and Corruption: Political Institutions Matter. Economics & Politics 17:135. Montinola, Gabriella R. and Robert W. Jackman. 2002. Sources of Corruption: A CrossCountry Study. British Journal of Political Science 32(1):147170. Morgenstern, Scott. 2004. Patterns of Legislative Politics: Roll-Call Voting in Latin America. Cambridge University Press. Nassmacher, K. H. 1993. Comparing Party and Campaign Finance in Western Democracies. In Campaign and Party Finance in North America and Western Europe, ed. A. Gunlicks. Boulder, CO: Westview Press. Nyblade, Benjamin and Steven R. Reed. 2008. Who Cheats? Who Loots? Political Competition and Corruption in Japan, 1947-1993. American Journal of Political Science 52(4):926941. Palda, F. and K. Palda. 1998. The Impact of Campaign Expenditures on Political Competition in the French Legislative Elections of 1993. Public Choice 94:157174. Pereira, Carlos, Marcus Andr e Melo and Carlos Mauricio Figueiredo. 2009. CorruptionEnhancing Role of Re-Election Incentives?: Counterintuitive Evidence from Audit Reports. Political Research Quarterly 62(4):731744. Persson, Anna, Bo Rothstein and Jan Teorell. 2010. The Failure of Anti-Corruption Policies: A Theoretical Mischaracterization of the Problem. QoC Working Paper Series 19:128. Persson, Torsten and Guido Tabellini. 2003. The Economic Eects of Constitutions: What Do the Data Say? Cambridge, MA: MIT Press. Persson, Torsten, Guido Tabellini and Francesco Trebbi. 2001. Electoral Rules and Corruption. NBER Working paper No. 8154 . Potter, Joshua D. and Margit Tavits. 2011. Curbing Corruption with Political Institutions. In International Handbook on the Economics of Corruption, Volume Two, ed. Susan RoseAckerman and Tina Soreide. Edward Elgar Publishing. Powell, G. Bingham. 2000. Elections as Instruments of Democracy: Majoritarian and Proportional Visions. Yale University Press. Powell, G. Bingham. 2004. The Chain of Responsiveness. Journal of Democracy 15:91105. 24

Powell, G. Bingham and Guy D. Whitten. 1993. A Cross-National Analysis of Economic Voting: Taking Account of the Political Context. American Journal of Political Science 37(2):391414. Primo, David M. and Jerey Milyo. 2006. Campaign Finance Laws and Political Ecacy: Evidence from the States. Election Law Journal 5(1):2339. Przeworski, Adam, Susan C. Stokes and Bernard Manin. 1999. Elections and Representation. In Democracy, Accountability, and Representation, ed. Adam Przeworski, Susan C. Stokes and Bernard Manin. Cambridge Univ Press. Rahn, Wendy M., John H. Aldrich and Eugene Borgida. 1994. Individual and Contextual Variations in Political Candidate Appraisal. American Political Science Review 88(1):193199. Rohrschneider, Robert and Matthew Loveless. 2010. Macro Salience: How Economic and Political Contexts Mediate Popular Evaluations of the Democracy Decit in the European Union. The Journal of Politics 72(4):10291045. Roper, Steven D. 2002. The Inuence of Romanian Campaign Finance Laws on Party System Development and Corruption. Party Politics 8(2):175192. Rosenson, Beth Ann. 2009. The Eect of Political Reform Measures on Perceptions of Corruption. Election Law Journal 8(1):3146. Sajo, Andras. 1998. Corruption, Clientelism, and the Future of the Constitutional State in Eastern Europe. East European Constitutional Review 7:3746. Samuels, D. 2001. Incumbents and Challengers on a Level Playing Field: Assessing the Impact of Campaign Finance in Brazil. Journal of Politics 63:569584. Samuels, David. 2004. Presidentialism and Accountability for the Economy in Comparative Perspective. American Political Science Review 98(3):425436. Samuels, David J. 1999. Incentives to Cultivate a Party Vote in Candidate-Centric Electoral Systems: Evidence From Brazil. Comparative Political Studies 32:487518. Scarrow, Susan E. 2007. Political Finance in Comparative Perspective. Annual Review of Political Science 10:193210. Shin, Myungsoon, Youngjae Jin, Donald A. Gross and Kihong Eom. 2005. Money Matters in Party-Centered Politics: Campaign Spending in Korean Congressional Elections. Electoral Studies 24(1):85101. Shugart, Matthew Soberg, Melody Ellis Valdini and Kati Suominen. 2005. Looking for Locals: Voter Information Demands and Personal Vote-Earning Attributes of Legislators under Proportional Representation. American Journal of Political Science 49(2):437449. Tavits, Margit. 2007. Clarity of Responsibility and Corruption. American Journal of Political Science 51(1):218229. 25

Thompson, Dennis F. 1995. Ethics in Congress: From Individual to Institutional Corruption. Washington, D.C.: The Brookings Institution. Treisman, Daniel. 2007. What Have We Learned About the Causes of Corruption from Ten Years of Cross-National Empirical Research? Annual Review of Political Science 10:211244. van Biezen, Ingrid and Petr Kopeck y. 2007. The State and the Parties: Public Funding, Public Regulation, and Rent-Seeking in Contemporary Democracies. Party Politics 13(2):235254. Weber, Ronald E. 1999. The Quality of State Legislative Representation: A Critical Assessment. The Journal of Politics 61(3):609627. Welch, Susan and John R. Hibbing. 1997. The Eects of Charges of Corruption on Voting Behavior in Congressional Elections, 1982-1990. The Journal of Politics 59(1):226239. Witko, Christopher. 2007. Explaining Increases in the Stringency of State Campaign Finance Regulation, 1993-2002. State Politics & Policy Quarterly 7(4):369393.

26

Table 1. OLS Model Predicting 2002-2003 Average Transparency International CPI Value.

D.V. District Magnitude Open-List

Model 1 0.005 (0.014) 3.460 (1.880) 0.185 (0.143)

Model 2 0.007 (0.008) 0.816 (0.960) 0.059 (0.067)

Model 3 0.005 (1.204) 0.468 (0.406) 0.023 (0.036)

Model 4 0.006 (0.004) 0.312 (0.342) 0.019 (0.030) 0.879 (0.161)

Model 5

DM x Open-List Illegal Contributions Parliamentary System E. Number of Parties Protestant Population Age of Democracy Federal

0.886 (0.161) 0.041 (0.135) 0.011 (0.056) 0.005 (0.005) 0.012 (0.007) 0.004 (0.271) 1.552 (0.307) 0.513 (0.290) 0.000 (0.006) 4.583 (0.921) 66 0.91

0.267 (0.333) 0.057 (0.137) 0.016 (0.007) 0.012 (0.016) 0.432 (0.522) 3.427 (0.891) 0.779 (0.744) 0.002 (0.012) 5.134 (0.532) 41 0.02 8.012 (2.730) 38 0.83

0.026 (0.165) 0.073 (0.091) 0.020 (0.005) 0.027 0.008 0.087 (0.327) 2.248 (0.356) 0.656 (0.384) 0.001 (0.007) 5.084 (1.204) 68 0.86

0.004 (0.137) 0.075 (0.075) 0.005 (0.005) 0.009 (0.008) 0.025 (0.270) 1.652 (0.315) 0.591 (0.323) 0.002 (0.006) 5.043 1.008 66 0.91

Log GDP per capita British Colony Imports

Intercept N Adj. R 2

Signicance indicated by * p 0.05, **p 0.01, and ***p 0.001. Models 1 and 2 include only those cases in Chang and Golden (2006). Models 3-5 include all democracies with SMD systems coded DM =1 and Open-List =0.

27

Table 2. OLS Model Predicting 2002-2004 Average World Bank Incidence of Illegal Campaign Donations to Political Parties.

D.V. District Magnitude Open-List

Model 1 0.001 (0.006) 0.812 (0.761) 0.038 (0.054) 0.253 (0.263) 0.004 (0.084) 0.016 (0.006) 0.012 (0.012) 0.307 (0.391) 1.577 (0.676) 0.557 (0.558) 0.005 (0.038) 2.895 (2.087) 38 0.74

Model 2 0.003 (0.004) 0.080 (0.321) 0.014 (0.028) 0.007 (0.122) 0.002 (0.028) 0.017 (0.004) 0.018 (0.006) 0.095 (0.237) 0.983 (0.279) 0.142 (0.273) 0.001 (0.006) 1.221 (0.914) 62 0.78

Model 3

DM x Open-List Parliamentary System E. Number of Parties Protestant Population Age of Democracy Federal

0.020 (0.853) 0.015 (0.020) 0.017 (0.004) 0.017 (0.006) 0.109 (0.231) 1.020 (0.266) 0.211 (0.284) 0.001 (0.005) 1.391 (0.853) 62 0.79

Log GDP per capita British Colony Imports

Intercept N Adj. R 2

Signicance indicated by * p 0.05, **p 0.01, and ***p 0.001. Model 1 includes only those cases in Chang and Golden (2006). Models 2 and 3 include all democracies with SMD systems coded DM =1 and Open-List =0.

28

Table 3. OLS Model Predicting 2002-2004 Average World Bank Incidence of Illegal Campaign Donations to Political Parties.

D.V. District Magnitude Open-List

Model 1 0.001 (0.003) 0.997 (0.386) 0.062 (0.029) 0.242 (0.081) 0.003 (0.004) 0.009 (0.006) 0.411 (0.360) 0.543 (0.090) 2.385 (1.049) 37 0.91

Model 2 0.004 (0.002) 0.191 (0.230) 0.002 (0.021) 0.142 (0.061) 0.006 (0.003) 0.010 (0.004) 0.235 (0.262) 0.452 (0.076) 1.836 (0.725) 59 0.88

Model 3

DM x Open-List Clarity in Campaign Finance Protestant Population Age of Democracy Log GDP per capita Past Corruption (2000-2002) Intercept N Adj. R 2

0.159 (0.062) 0.006 (0.003) 0.011 (0.004) 0.117 (0.260) 0.412 (0.075) 1.655 (0.729) 59 0.88

Signicance indicated by * p 0.05, **p 0.01, and ***p 0.001. Model 1 includes only those cases in Chang and Golden (2007). Models 2 and 3 include all democracies with SMD systems coded DM =1 and Open-List =0.

29