Two Essays on Political Economics: Corruption, Income and Democracy

This master thesis includes two empirical studies on the political economics:
Section 1: Corruption and Its Determines
In this thesis, we use the corruption perception index (CPI) data from Transparency International to study the relationship between corruption and its determinants, which include several political and economic freedom variables. One of the most significant contributions in this thesis is our attempt to find a non-linear relationship between corruption and economic development. We expected that graphically this relationship would be an “inverse-U”. Mostly, we found that corruption continuously deteriorates until PPP GDP per capita reaches US$1808.04 and then the level of corruption decreases. In other cases, we find that corruption is negatively related to business freedom, monetary freedom, financial freedom, investment freedom, property rights, export and import percentage of GDP, inflation, education and Protestantism. Instead, corruption is positively related to government size as well as communist dummy variables.

Section 2: Democratic Perception and Political Behaviors
The aim of this article is to determine how education affects people’s political participation. In this thesis, two kinds of political behavior are discussed: voting and attending campaign meetings or rallies. We estimate each political behaviors according to two factors: political participation and political perception (knowledge). We estimate how education and other individual characteristics affect our political knowledge, whether better understanding of democracy will make people more likely to engage in political affairs, and further more examine what makes a country more democratic? Otherwise. In order to solve the simultaneous problem of politic behaviors and democratical perception, we constructed a simultaneous model, and used it as our main analysis method. By using a unique data set East Asia Barometer, we acquired individual level data to answer these questions. The results indicate that when other factors remain constant, education plays an important role in forming people’s democratical perceptions, which positively affect people’s decision to engage in political activities.