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

(with Akshat Gautam)

We examine the conditions under which the political-institutional configuration of party alignment influences corruption. Party alignment entails politicians sharing the same party at higher and lower levels of government, so aligned politicians have greater access to the spoils of the bureaucracy, yielding higher potential for corruption. By the same token, party alignment signals clarity of political responsibility for corruption to voters, suggesting a potential corruption-reducing effect of party alignment. We disentangle the conditions under which party alignment reduces corruption using a formal theoretical framework and a close-election regression discontinuity design for causal identification. Our empirical estimates rely on a novel dataset of objective corruption information that we draw from municipal audit reports in Guatemala. We find that party alignment reduces corruption when both politicians are subject to significant electoral competition and voters’ poverty levels are low or decreasing. 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]