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Are different types of capitalism associated with differences in levels of corruption? If so, why? The author addresses these questions by examining the relationship between different conceptions of the varieties of capitalism, and the prevalence of corruption, as measured by Transparency International’s Corruption Perception Index, in 18 advanced capitalist nations. The findings suggests that two particular models of capitalism ? the corporatist social democratic model and the liberal model ? have outperformed the more ?mixed? models of capitalism in terms of curbing corruption. Another important finding is that, all else being equal, a country that has a bank-centered financial system is likely to have a higher level of perceived corruption than a country with a capital market-centered financial system. Finally, the size of a country’s home market is shown to be a good predictor of corruption. Small countries have a tendency to develop a low-corruption variety of capitalism, while large countries are more prone to develop a high-corruption variety of capitalism. The paper outlines the causal mechanisms through which each of these variables affect levels, and changes in the levels, of perceived corruption in the age of European integration and economic globalization. [ABSTRACT FROM AUTHOR]

Many scholars argue that political institutions affect economic and social inequality, while others claim that inequality affects institutions. Following most historical literature, we suggest that exogenous changes in technology, trade, or demography alter the value of factor endowments and thus change both inequality and institutions. We support this assertion with a welfare-maximizing model of endogenous institutional choice, with a series of historical case studies, and with an empirical examination of the history of franchise extension in nineteenth- and twentieth-century Europe. [ABSTRACT FROM AUTHOR]