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

(with Akshat Gautam)

Party alignment entails politicians sharing the same party at higher and lower levels of government, giving aligned politicians greater access to the spoils of the bureaucracy. Does the political-institutional configuration of party alignment thus necessarily lead to more corruption? Given that party alignment also signals clarity of political responsibility for corruption to voters, we argue that party alignment can actually yield lower levels of corruption under some circumstances. Using a formal theoretical framework, we show that aligned politicians are less likely to engage in corruption if there is both significant electoral competition and voters’ poverty levels are low or decreasing. We find empirical support for this argument using a novel dataset of objective corruption information drawn from municipal audit reports in Guatemala and a close-election regression discontinuity design for causal identification. The results of our study document how the reduction of corruption through modernization forces such as decreasing poverty takes place through political institutions. [Draft Paper]