Poverty, Party Alignment, and Reducing Corruption through Modernization: Evidence from Guatemala

Presented at the Public Choice Society Conference

Party alignment entails politicians sharing the same party at higher and lower levels of government, giving aligned subnational units greater access to discretionary resources. Does the political-institutional configuration of party alignment thus necessarily increase subnational corruption? Given that party alignment can also clarify political responsibility for voters, we theorize that it can instead reduce corruption under two conditions: high electoral competition and lower poverty. We examine the empirical implications of the theory using a close-election regression discontinuity design and novel corruption data from Guatemalan municipal audit reports. We find that municipalities barely electing aligned rather than unaligned mayors exhibit lower corruption when poverty is low or decreasing. The results suggest that the reduction of corruption through modernization forces takes place through political institutions. [Draft Paper]