Press freedom and Corruption

L E C T U R E 7 - PA P E R 8 Q M

Correlations between Media Freedom, Political Tenure and Corruption

Evidence on the Media

Press freedom is correlated with political turnover and

corruption There are variety of corruption measures Transparency international Business International Gallup Kauffman et al

Four types of corruption measures

I.

Based on indicators of corruption assembled by private risk assessment firms. E.g., Business International (BI) index of corruption - based on standard questionnaires completed by BI correspondents in about seventy countries (now run by the Economist Intelligience Unit). II. Uses averages of ratings reported by a number of perception based sources, with Transparency Internationals Corruption Perceptions Index (CPI) (widely used, global) III. Provides cardinal scores of corruption based on surveys World Bank Business Environment& Enterprise Performance Survey IV Worldwide Governance Indicators (WGI) covering 212 countries, measuring six dimensions of governance between 1996 and 2007: Voice and Accountability, Political Stability and Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption : Reflects the views on governance of public & private sector and NGOs & citizen and firm survey respondents

Measures of corruption
The 2004 Global Competitiveness Survey commissioned by the World Economic Forum asks the following two questions: 1) When firms in your industry do business with the government, how much of the contract value must they offer in additional payments to secure the contract?; 2) On average, what percentage of annual revenues do firms like yours typically pay in unofficial payments to public officials? Similar specific questions are also presented by firm surveys like World Banks Business Environment and Enterprise Performance Survey (BEEPS). Household surveys like the Gallups Voice of the People and Global Barometer Surveys ask respondents to report actual percentages of corrupt officials or actual

Conditional Correlations Between Print Freedom, Corruption and Political Longevity

Correlations Between Print Freedom, Corruption, Political Longevity and Press Ownership

Correlations between corruption, tenure, press ownership conditional on print freedom

What might we conclude about press freedom?

Corruption is vely correlated with press freedom
Corruption is +vely correlated with political longevity Press freedom is vely correlated with political

longevity State ownership (& concentration) is +vely correlated with corruption and political longevity and vely correlated with press freedom Critical: ownership (concentration, foreign/state) is correlated with corruption and political longevity only for countries with high press freedom

Is media freedom a control on corruption in government?

Brunetti, Aymo, and Beatrice Weder, [2003], .A free press is bad news for corruption,. Journal of Public Economics, 87(7-8), 1801-1824. Three routes through which corruption might be controlled 1. Internal mechanisms and incentives within bureaucracy negative if : Lack of explicit standards; nepotism rather than meritocratic means of obtaining reward; low level of public versus private wages (?)

Mechanisms and Rents cont

2. External mechanisms: Judiciary, press positive if: independent judiciary; citizens committees; generally high education/development (?)

3. Level of rents that can be appropriated are low positive if: low government intervention in markets, light regulation and distortive policies Claim: press freedom is external control that works both against extortive and collusive corruption Extortive: civil servants can delay or refuse projects but firms could report them (Qn: why do they have such powers) Collusive: Here firms might collude with individual agents - and may have no incentive to report - so need press (why?)

Data
Measure of press freedom is assembled by Freedom House since

1996: Expanded indices of press freedom for 145 countries based on Experts opinions; findings of international human rights groups/ press organisations; analysis of publications and news services; reports of governments on related subjects Several dimensions of press freedom: Laws and regulations that influence media content reflects "our judgment of the degree of actual impact on press freedom" (0-15, 15 is worst) Political influence over media content captures "political pressure on the content Economic influence over media content: reflects "competitive pressures in the private sector that distort reportage etc Repressive actions: measures actual acts which constitute violations of press freedom

Corruption
Main measure of corruption is an indicator collected by

the International Country Risk Guide (ICRG) Varies from 0-6 (0 is worst) Use the average for 1994-1998 which is available for 128 countries Also use corruption measures from three alternative sources: World Bank, Institute for Management Development and Transparency International

 ^1 is the key coefficient of interest- should be negative

The specification also has controls for all the other ways

in which controls on corruption could operate BUREAU: measure of the quality of the bureaucracy. The variable is provided annually for a large number of countries by ICRG based on evaluations from country experts RULE: measure of external control and is also provided by ICRG Marks the presence of "sound political institutions, a strong court system, and provisions for an orderly succession of power" Expectation: ^2 ; ^3 positive and significant

 GDP and HUMCAP measure the level of per capita

GDP in 1995 & educational attainment Proxy for external controls: the ability of civil society to judge government performance and act as an external control on corruption (expectation) ^4; ^5> 0

Other predictions
TRADE measures the exposure of an economy to

foreign trade: openness implies competitiveness hence less rents ^6 > 0 BLACK measures the black market premium on foreign exchange - Broad indicator of the degree of government-created distortions in an economy: ^7 < 0 ETHNIC measures the degree of ethnolinguistic diversity : ^8 < 0

Definitions of variables used

More definitions

Many econometric difficulties

Main one is endogeneity of press freedom - corrupt

regimes might seek to repress freedom (recall model) Three checks: exclude the countries with highly repressive regimes from the sample use several instruments for press freedom political rights being one Finally exploit the time series dimension of alternative data set on press freedom Diffy because only imperfect instruments and little time series variation

Size of fall in corruption for gains in press freedom

Coeffs range from -.015 to -.037

This suggests that an improvement of one standard

deviation (25) in press freedom could reduce corruption between 0.4 and 0.9 points (on the scale form 0 to 6) Improving press freedom to the level of Norway would mean Indonesia to Singapore, Nigeria to Belgium, Russia to Slovakia in terms of corruption!