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 Transforming Government: People, Process and Policy
Does E-government reduce corruption? Evidence from a heterogeneous panel data
model
Devid Kumar Basyal, Niraj Poudyal, Jin-Wan Seo,
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Devid Kumar Basyal, Niraj Poudyal, Jin-Wan Seo, (2018) "Does E-government reduce corruption?
Evidence from a heterogeneous panel data model", Transforming Government: People, Process and
Policy, Vol. 12 Issue: 2, pp.134-154, https://doi.org/10.1108/TG-12-2017-0073
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TG
12,2
134
Received 31 December 2017
Revised 4 May 2018
9 May 2018
Accepted 10 May 2018
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Transforming Government:
People, Process and Policy
Vol. 12 No. 2, 2018
pp. 134-154
© Emerald Publishing Limited
1750-6166
DOI 10.1108/TG-12-2017-0073
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1750-6166.htm
Does E-government reduce
corruption? Evidence from a
heterogeneous panel data model
Devid Kumar Basyal
Department of Public Administration, Incheon National University,
Incheon, South Korea
Niraj Poudyal
School of Arts, Kathmandu University School of Arts, Lalitpur, Nepal, and
Jin-Wan Seo
Department of Public Administration, Incheon National University,
Incheon, South Korea
Abstract
Purpose – The purpose of this paper is to revisit the relationship between E-government and corruption using
global panel data from 176 countries covering the period from 2003 to 2014, considering other potential
determinants, such as economic prosperity (gross domestic product per capita [GDPPC]), price stability (inflation),
good governance (political stability and government effectiveness) and press freedom (civil liberties and political
rights) indicators. Hence, the main rationale of this study is to reexamine the conventional wisdom as to the
relationship between E-government and corruption using panel data independent of any preexisting notions.
Design/methodology/approach – The probability reduction approach of empirical modeling proposed
by Spanos (2009) is used to test the relationship. Secondary data were collected from the United Nations, the
World Bank, Transparency International and Freedom House.
Findings – No statistical evidence was found for the idea that E-government has a positive impact on
corruption reduction following a rigorous test of the proposition. However, strong evidence was found for the
positive impact of a country’s government effectiveness, political stability and economic status. There also
appears to be some evidence for the effect of GDPPC and civil liberties. There is no evidence to prove that
inflation and political rights have any corruption reducing the effect.
Research limitations/implications – Case studies suggest that E-government is helpful for curbing
corruption. This study includes and examines some of the potential and important variables associated with
corruption. Further research is encouraged and it should include more variables, such as national culture,
poverty, religion and geography. Regarding methodology, a more parsimonious model must be sought to take
into account adequately the entire probabilistic structure of the data.
Practical implications – The findings of the study demonstrate that E-government is less significant for
reducing corruption compared to other factors. Hence, policymakers should further focus on other potential
areas such as socio-economic factors, good governance, culture and transparency to combat corruption in
addition to improving digital government.
Originality/value – This research applies a new methodological approach to the study of the relationship
between E-government and corruption.
Keywords Corruption, E-government, Empirical study, Heterogeneous panel data
Paper type Research paper
1. Introduction
Corruption and measures for reducing it are one of the most cited and discussed issues in
social science. The widely used and common definition of corruption is that “it is an abuse of
 a public or private power for direct or indirect private gain” (World Bank, 2017; United E-government
Nations, 2004). Corruption is largely associated with public officials and agencies, though it
cannot be denied that it also exists within the private sector (Tanzi, 1998). More than 4,000
books and journal articles were published in the past 10 years with corruption as their main
theme, according to Iqbal and Seo (2008) citing the Global Corruption Report (2001).
Klitgaard (1988) defined corruption with the help of the simple equation, Corruption =
Monopoly þ Discretion – Accountability (C = M þ D – A). This was later modified by the
UNDP by adding two other dimensions, namely, integrity and transparency {C = (M þ D) –
135
(A þ I þ T)}. Corruption is charged as a prime suspect and is even found to be the culprit in
almost every major social problem. It impedes development and good governance (Iqbal and
Seo, 2008) and undermines justice (Transparency International, 2017) and is thus considered
a threat to the stability and security. Concern over corruption is even more pronounced in
developing countries (Tanzi, 1998; Iqbal and Seo, 2008; World Bank, 2017). A significant
area of study in the corruption literature has been explaining the varying degrees, sources
and dimensions of corruption across different societies and economies (Tanzi, 1998; Jain,
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2001; Montinola and Jackman, 2002; Adsera, Boix and Payne, 2003).
Transparency generates accountability and, in turn, generates improved performance
(Eggers, 2005). Information communication technologies (ICTs) are seen by many as a cost-
effective and convenient means of promoting openness and transparency and of reducing
corruption (Bertot, Jaeger and Grimes, 2010). The rise of the internet has bought significant
attention to the issue of transparency provided through e-governance as an instrument for
reducing corruption (Bhatnagar, 2003; Heeks, 2011; Balboa and Medalla, 2006; Payne, 2006;
Bhatnagar, 2008; Iqbal and Seo, 2008; Kim et al., 2009). E-government has the potential to
play a considerable role in combating corruption (OCED, 2005; UNDP, 2004; Elbahnasawy,
2014) though ICT might even create new opportunities for corruption (Heeks, 1998;
Elbahnasawy, 2014).
Heeks and Bailur (2007) examined 84 research articles related to E-government, and
found weak or confused application of theory and lack of rigorous research methods. They
suggested ways of strengthening E-government research based on research philosophy,
theory, methods and institutional factors. Most prior research on E-government and
corruption are case studies, whereas few studies use empirical methods at a macro level.
Most of these empirical studies rely on either time series or cross-sectional data sets,
whereas very few use panel data sets. Furthermore, the treatment of data sets is not clearly
mentioned and no clear justification is given as to why a particular model specification is
used. This paper has made an attempt to provide a sound methodological framework to
model panel data to test a hypothesis regarding corruption and E-government.
There is a common notion of an inverse relationship between E-government and
corruption. However, interestingly, the case appears to be different in South Korea[1]. Hence,
the main rationale of this study is to reexamine the conventional wisdom as to the
relationship between E-government and corruption using panel data independent of any
preexisting notions. This study tests the aforementioned inverse relationship between E-
government and corruption. Consequently, the study gives governments and policymakers
new evidence to make appropriate policies and strategies for addressing corruption.
This paper tests whether or not there is a relationship between E-government and
corruption using a fully heterogeneous non-linear model with panel data from176 countries.
The paper attempts to test the proposition rigorously against observable corruption
phenomena using a probabilistic reduction approach (Spanos, 1994, 2010 for methodology
and Poudyal, 2012; Poudyal, 2016 for applications). Available data were gathered for the
variables or the indicators of the variables for this purpose. The statistical model was
 TG developed using purely statistical information observed in the data through exploratory
12,2 data analysis (EDA). The detail of the approach is discussed in Section 3.

2. Theoretical background: corruption and E-government

Corruption and E-government literature is basically divided into two categories, case studies
and broader empirical research.
136
2.1 Corruption and E-government: case studies
Various case studies show the different types of corruption and how some kinds (petty
corruption) can be curbed through ICT use (Cisar, 2003), and examples of E-government as a
key tool for fighting corruption (Bhatnagar, 2003). Balboa and Medalla (2006) modified the
Klitgaard equation (C = M þ D-A) by adding the dimensions of integrity and transparency
to explain the UNDP equation, {C = (M þ D) – (A þ I þ T)}. Payne (2006) highlighted the
costs of corruption and showed how E-government can limit corruption though admitting
that E-government alone does not stop corruption. Pathak et al. (2008) concluded that e-
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governance initiatives alone cannot curb corruption, though e-governance can improve
relationships between citizens and government.
Computerized systems can reduce bribery rough building a more efficient, accountable and
transparent government (Bhatnagar, 2008). Ojha et al. (2009) went further and argued through
their political economy approach that E-government can be an effective measure for ending
corruption through taking care of “the economics of crime, principal-agent theory and
transaction cost economics.” Iqbal and Seo (2008) cited the Korean cases of the Online
Procedure ENhancement (OPEN), a government/citizen initiative (G2C) and the Government e-
Procurement System (GePS), a government/business initiative (G2B), and used the Drivers,
Owners, Constructors, Third parties, Operators, Recipients, Sources (DOCTORS) theoretical
framework (Heeks, 2011) of limiting the in-person contact that can give rise to corruption.
However, they also noted other factors like education, national culture, political stability, rule of
law, economic infrastructure and even link corruption as a kind of habit that e-governance can
change. Kim et al. (2009) also used OPEN as a case study demonstrating E-government as an
instrument for improving government transparency and combating corruption.

2.2 Corruption and E-government: empirical studies

There is some empirical research covering corruption and E-government though it is scant.
An early empirical study of the relation between E-government and anti-corruption used
international cross-sectional data from 2003 t0 2004 to examine the impact of E-government
on corruption and to reveal that the relationship was positive (Shim and Eom, 2008). The
importance of other important socioeconomic and cultural variables that can affect
corruption is also shown. Andersen (2009) found a positive relationship between E-
government and the control of corruption indicator using ordinary least squares and two-
stage least squares with panel data from 149 countries.
Lio et al. (2011) estimated the effects of internet adoption on reducing corruption using
panel data from 70 countries from 1998 to 2005. Lio et al. (2011) used Granger causality tests
employing a dynamic panel data model to deal with the problem of endogeneity. The effects
of internet adoption on reducing corruption are statistically significant but small in
magnitude. Heeks (1998) and Kim et al. (2009) called for “a more holistic vision” that takes
into account not only information systems but also organizational, sociocultural and
environmental factors when implementing controls on corruption. Elbahnasawy (2014) also
examined the impact of E-government and internet adoption on reducing corruption using
unbalanced panel data from 160 countries from 1995 to 2009.The results show E-
 government to be a powerful tool in reducing corruption via telecommunication E-government
infrastructure and the scope and quality of online services, which is strengthened by greater
internet adoption (Elbahnasawy, 2014).
Case studies and the few empirical studies have shown that E-government may be helpful
for reducing corruption, but there are doubts whether digital government is actually effective in
reducing corruption (Kim et al., 2009). ICTs sometimes have no substantial effects in reducing
corruption and may even create new opportunities for corruption (Heeks, 1998). ICT has been
used to curb corruption in developed countries and there is doubt whether the same methods 137
apply in developing countries (Mahmood, 2004). Digital government can be helpful for
promoting the efficiency and effectiveness of government performance and may be helpful in
reducing corruption in particular cases but it is still doubtful that it is universally applicable.
This study tries to analyze the relationship between digital government and corruption using a
probability reduction approach with a fully heterogeneous nonlinear model.

3. Methodology and data

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3.1 Probability reduction approach

Data have traditionally been used to quantify and/or confirm existing theory though this
approach does not satisfy Popper’s falsifiability (Popper [1959] for details). In other words,
the theory is assumed to be true before being tested against the data. This paper uses an
alternative strategy for falsifying/confirming a theory. The approach is called the
probability reduction approach (Spanos, 2009).
A statistical model is developed in this approach by taking into account the observable
probabilistic structure (such as trends and cycles) of the data (Spanos, 2009; Poudyal, 2012;
Poudyal et al., 2016; Pokharel et al., 2016). This can be done independent of the theoretical
restrictions once the list of variables to be considered for the study is finalized and the choice of
dependent variable is made with the help of substantive or theoretical information. Once the
statistical model is derived using purely statistical information observed in the data, a
hypothesis or a whole theory is embedded into this statistical model to perform the statistical
test. In this way, judgment of the model (statistical information in the form of a statistical
model) is not influenced by the theory, a priori, thereby allowing a fair test of the theory.

3.2 Data sources, variable definitions and exploratory data analysis

It is very important to visualize the observable data used to test the theory in probabilistic
reduction approach as part of the model specification. Panel data from 176 countries from
2003 to 2014 are used. The summary of the data, sources, meaning of variables and the
range of the data is given in Table I.
The most striking feature seen in the data is that it is not normal[2]. Most of the series are
skewed, requiring some form of nonlinear transformation to render them symmetric at
minimum. The EDA also shows that the data are heterogeneous. The data are measured
across time so the observations are time-variant (trending across time) and auto-correlated.
See the plots attached in Appendix 1 (Figure 1) for the observed dynamics of the variables
under study. The plots are for average values computed for each year.

3.3 Model specification

The EDA clearly shows that the data, non-normal, nonlinear, have a dependence structure
(lagged effects due to time), and heterogeneity in time and country. A linear multiple
regression model cannot take these probabilistic structures into account (Spanos, 2010;
Poudyal, 2012). Various transformations of the Box-Cox type are considered (Box and Cox,
1964) to tackle non-normal and nonlinear data (as linearity and normality are mutually
 Downloaded by Mr Devid Basyal At 02:36 16 August 2018 (PT)

TG
12,2

138

Table I.
Descriptive statistics
Variable Indicator Range Meaning Source of data Reference from

Corruption CPI 0-100[3] A composite index which scores countries Transparency Shim and Eom
between 0 (the highest corruption) and 100 International (2008), Lio et al.
(the lowest corruption) on how corrupt their (2011),
public sectors are seen to be Elbahnasawy
(2014), Lupu and
Lazar (2015),
E-government EGDI 0-1 (lowest to A comprehensive measure of the UN E-government Elbahnasawy
highest) willingness and capacity of national surveys (2014)
administration to use the online presence of
countries
Economic GDPpc Per capita GDP It shows how prosperous is a country in World Bank Vinod (1999),
prosperity in constant 2010 terms of economic aspect Krishnan et al.
US dollars (2013),
Elbahnasawy
(2014),
Inflation Inflation It is measured at A general increase in prices and fall in the World Bank Elbahnasawy
percentage per purchasing value of money (2014); IMF data
year set
Press freedom Political rights 1-7 (i.e. 1-2.5 free, Press freedom data provides ratings of Freedom House Andersen (2009),
in the world Civil liberties 3.0-5.0 partially countries based on the degree of democratic Elbahnasawy
free and 5.5-7.0 freedoms in the nations around the world (2014)
not free)
Governance Political stability and 2.5 (weakest) to It measures perceptions of the likelihood of World Bank’s
absence of violence 2.5 (strongest) political instability and/or politically Worldwide
motivated violence, including terrorism Governance
Indicators (WGIs)
Government 2.5 (worst) to It captures citizens’ perceptions of quality, World Bank’s Lupu and Lazar
effectiveness 2.5 (best) the degree of independence from political Worldwide (2015)
pressures and the government’s Governance
commitment to such policies Indicators (WGIs)
 exclusive [Spanos, 1994]) with the transformation close to a bell-shaped histogram being E-government
chosen. More importance is given to the symmetric nature of the transformed data in this
process. The decision is made on the basis of visual inspection of the histograms of the
transformed data. The transformations done for each variable is shown in Table II.
See Figure 2 in Appendix 1 for the histograms of the variables before and after the
transformation. The transformed data are more symmetric and bell-shaped.
Time dependence can be handled by using lagged terms of the variables CPI, GDPpc,
inflation, political stability and government effectiveness. Second-degree trend polynomials, 139
time dummies and country dummies are used to manage heterogeneity in the data. The
linear regression model is expected to be statistically valid after the transformations and
inclusion of these terms (formal tests are done in Appendix 3).
The model is specified in the following steps:
 An initial model is specified: Model 1.
 Misspecification tests show that Model 1 is highly misspecified.
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 A new model is specified based on steps 1 and 2: Model 2.

 Misspecification tests are applied to Model 2.
 Steps 1-4 are repeated until the misspecification tests fail to reject the model. This
final model can be called statistically adequate.
 All inferences, including hypothesis testing, are done using the statistically adequate
model.

The models shown in Table III were arrived at applying the above steps.

Table II.
The transformation
Variable Transformation
CPI CPI^(0.01) of the original
GDPPC Natural log of GDPPC variables to render
Inflation Inflation^0.2 them symmetric and
Political stability (Political stability þ 4)^2 bell-shaped

Models Distribution Dependence Linearity Homoscedasticity Homogeneity

1 Normal Independence Linear Homoscedastic Two-way fixed effect (allows only

intercept to change with time and
country)
2 Normal Dynamic: Linear Homoscedastic Two-way fixed effect (allows only
Markov (1) intercept to change with time and
country)
3 Non-normal Dynamic: Nonlinear Homoscedastic Two-way fixed effect (allows only
Markov (1) intercept to change with time and
country)
4 Non-normal Independence Nonlinear Homoscedastic Fully heterogeneous allowing all
parameters to change across time
5 Non-normal Independence Nonlinear Homoscedastic Fully heterogeneous allowing all
parameters to change across time Table III.
and dummy variables based on Models estimated
GDP level (less than $3,000; $3,000- using probabilistic
$22,000 and above) reduction approach
 TG The mathematical formulation of the models is given in Model Formulation:
12,2

Model 1 : Yit  NIID b 0it þ b 1 Xit ; s 2


Model 2 : Yit  NIID a0it þ a1 Xit þ a2 Yit1 þ a3 Xit1 ; s 2


140 Model 3 : Y it  NIID a0it þ a1t xit þ a2t yit1 þ a1t1 xit1 ; s 2


Model 4 : Yit  NIID a0it þ a1t xit þ a2t ; s t 2


Model 5 : Yit  NIID a0it þ a1t D1i þ a2t D2i þ a3t xit ; s t 2

Where, t = 1,2,3,. . . i = 1,2,3,. . . and yt = f(Yt) and xt = f(Xt), D1i = 1 if the country i has GDP
more than $3,000 and less than $22,000 and D1i = 0 otherwise. Similarly, D2i = 1 if the country i
has GDP more than $22,000 and D2i = 0 otherwise. NIID stands for “Normal Independent and
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Identically distributed.” The mean CPIs for these groups of the countries are: 29.655, 41.910 and
72.545 respectively, showing a high level of heterogeneity with respect to per capita GDP,
justifying the use of the dummy variables. The exact functional form of the transformation is
given in Table II. Here Model 1, 2 and 3 are two-way fixed effect models merely allowing for
different intercepts across time and countries. In addition, Models2 and 3 are also dynamic.
Models 4 and 5 are fully heterogeneous models allowing for heterogeneous variance as well as
heterogeneous slope coefficients for each regressor, not only the intercept. Models 1 and 2 are
normal and linear, whereas 3, 4 and 5 are linear only after the transformations shown in
Table II. Models 1, 2 and 3 do not allow for heterogeneous variance and slope coefficients,
whereas Models 4 and 5 do allow for such full heterogeneity. Models 4 and 5 are much more
statistically flexible in terms of allowing all the parameters to change across time and countries.
Models 4 and 5 are better than Model 1 because they allow the slope coefficients to change
across years, whereas fixed effect models such as Models 1, 2 and 3 do not. One caveat for
Models 4 and 5 is that they do not allow the modeling of time (Markov) dependence as each
year is analyzed in isolation. Model 5 is a slight extension of Model 4 by adding dummy
variables for GDP level: poor (per capita GDP less than $3,000), rich (per capita GDP between
$3,000 and $22,000) and very rich (per capita GDP greater than $22,000). The cut offs are
determined so as to render all the assumptions of the statistical model valid for the data.

3.4 Misspecification test

A thorough (formal and informal) misspecification analysis is done to validate the statistical
adequacy of the model, i.e. whether the model adequately captures all the probabilistic
structure of the data. An example of the MS test done in this paper is shown using a version of
Models 1 and 5. Model 1 is estimated for the year t = 2015 and rigorous MS tests are applied
against it. The MS tests are based on the auxiliary regressions such as the following (Spanos
and McGruiek, 2001; Poudyal, 2012; Poudyal et al., 2016):

^ i ¼ a0 þ a1 Xi þ a2 Xi 2 þ a3 i þ v1i
AU1 : u

^ i 2 ¼ b0 þ b1 Xi þ b2 Xi 2 þ b3 i þ v2i
AU2 : u

^ i ¼ c0 þ c1 Xi þ c2 i þ v3i
AU3 : u
 The assumption of independence is expected to be valid with respect to countries. The E-government
normality test is done using the Jarque–Bera (J–B) test (Jarque and Bera, 1987). Outlier
values are omitted in this particular test to avoid the extreme value effect. The other tests
follow. The linearity assumption is violated if a2 = 0 is rejected. The assumption of
homoscedasticity is violated if b1 = b2 = 0 is rejected. The assumption of i-invariance
(homogeneity) is violated if c2 = 0 is rejected (see Appendix 2 for details of the assumptions
of such models). The issue of t-invariance is irrelevant since the data are analyzed for a
particular year in isolation allowing the parameters to change with t. 141
Misspecification test results are shown in Table IV. The tests are shown using only 2015
data and only gross domestic product per capita (GDPPC) for the sake of brevity. The
results would not change much for other years and the situation gets worse with the
inclusion of other independent variables.
P-values less than 0.05 would indicate that the null hypothesis is rejected, violating the
model assumptions. All tests strongly reject null Model 1 except for the J–B test. The
violation of the assumption of linearity and homoscedasticity also indicates the violation of
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the normality assumption as well. The assumption of i-invariance is violated indicating the
need for country-varying parameters. Moreover, the scatter plot (Figure 3 in Appendix 1)
between CPI and GDP clearly shows the non-elliptical nature of the data, indicating non-
normality and nonlinearity.
Once the model is re-specified by transforming the data, the same scatter plot looks like
Figure 4 in Appendix 1. Misspecification test results shown under Model 5 indicate that the
model passes all the tests. Hence, inferences based on Model 5 are more reliable, making it the
econometric model for analyzing the factors affecting the CPI. Model 5 is derived without any
theoretical bias so it can fairly judge any theory that can be encompassed within this model.

4. Empirical results
The descriptive analysis of the main variables is mentioned in Table V. The data are from
176 countries from 2003 to 2014 for a total of 1,086 observations for each variable.

Model 1 Model 5

Linearity (F) 9.757 (0.002) 3.333 (0.070)

Homoscedasticity (F) 30.639 (0.000) 1.666 (0.192)
Normality (J-B) 4.132 (0.1267) 1.371 (0.504)
Homogeneity/i-invariance (F) 13.515 (0.000) 0.302 (0.584)
Table IV.
Note: *The values represent F-statistics or t-statistics and the p-values are inside the bracket The MS test results*

Variables Obs Mean SD Min Max

CPI (sqrt) 1,086 6.27 1.60 2.89 9.85

E-government 1,086 0.46 0.21 0.00 0.95
Inflation 1,086 7.51 8.88 7.60 103.82
Political stability 1,086 3.40 2.10 1 7
Civil liberties 1,086 3.33 1.77 1 7
Political rights 1,086 0.15 0.95 3.18 1.66
Government effectiveness 1,086 0.005 0.99 2.09 2.43 Table V.
GDPpc (Ln) 1,086 8.47 1.53 5.27 11.60 Descriptive analysis
 TG The following inferences can be drawn based on the estimates in Tables AI-AIII in
12,2 Appendix 3. E-government has no significant effect on CPI for 2003-2012. In 2014, the effect
was significant at the 0.05 level though the coefficient is negative implying possible
endogeneity. There is no evidence of an association between E-government (EGDI) and
corruption (CPI). GDPPC has a positive effect on CPI in all years in Model 4, but statistical
significance is observed only in 2003, 2004 and 2008. However, Model 5 does not produce
142 any such evidence. There is very little evidence for a positive effect of GDPC on CPI.
Similarly, examining the relationship between inflation and CPI, there is no evidence for an
effect of the rate of inflation on corruption perception.
In contrast, good governance had a strong impact on corruption. Political stability and
government effectiveness both had a positive and statistically significant effect on CPI in all
years. On the other hand, freedom indicators show a negative effect on corruption. Civil
liberties only showed a positive and significant effect in 2014. There is strong evidence of
CPI varying across countries with the varying levels of economic well-being (poor, rich and
very rich) in 2003, 2004 and 2005. It can also be noted that Models 2 and 3 indicate that the
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CPI is very persistent as indicated by the highly significant coefficients of the lagged terms.
This is an area for potential exploration in future research.

5. Discussion
Corruption is considered as dishonesty, heinous crimes and a major impediment to economic
growth and development (Mauro, 1995; Tanzi, 1998). It is an unsolvable issue worldwide
and adversely influences societies in many respects (Zheng, 2016). Frequent corruption
scandals in the media have shaken governments worldwide. Transparency International’s
2017 newsletter summarized some of the biggest corruption stories of the year, mentioning
Brazil, South Korea, Spain, South Africa, Azerbaijan, and the paradise papers scandal then
still in the limelight (Transparency International, 2017). Poor developing and countries are
more prone to corruption although the problem of corruption is a grave concern worldwide.
Corruption receives enormous attention from scholars, government officials,
businesspeople, social activists and the media, with 8,568 articles published found in the
Web of Science from 2005 to 2017 and 983 articles published in SSCI and SCI listed journals
alone (Web of Knowledge, 2017) and Google Scholar lists more than a million corruption-
related papers and books available online. Theorists, policymakers and practitioners have
been constantly trying to search for the causes of corruption (Husted, 1999; Zheng, 2016).
Economic, social, political, cultural, governance, transparency and participation are
significant variables associated with corruption in past studies.
E-government has been seen as a means for promoting openness and transparency and to
reduce corruption with the rise of ICTs worldwide (Bertot et al., 2010). The use of E-
government and social media-based government is likely to increase citizen participation in
policy processes. It could further make employees more accountable, transparent and time-
bound. Prior studies have demonstrated that E-government can be a tool to curb corruption,
though mostly through limited case studies. However, the case of South Korea and some other
countries do not support this conventional wisdom. Most past empirical studies show the
relationship between E-government and corruption by controlling other potential variables or
using only those variables that turn out to be statistically significant. Most developed
countries already have a high level of ICT development and have also other potential anti-
corruption indicators developed to a relatively high level. This raises the question as to
whether E-government is a real anti-corruption driver or only a proxy for prosperity.
This adds to the discussion of whether or not E-government can curb corruption. The
problems associated with corruption require further investigation as corruption is a multi-
 dimensional problem. E-government and/or open government can be measures of corruption E-government
control but may not be the only panacea. Some scholars (Iqbal and Seo, 2008) see corruption as
a kind of habit and some activities become an accepted part of the culture in some countries
even though such activities are considered corrupt in other countries, limiting the possibility for
objective behaviorally based definitions of corruption. This study is an attempt to reexamine
the relationship between E-government and corruption considering the role of other potential
variables. The empirical results indicate no such significant impact of E-government in 143
reducing corruption. Hence, it is really important for politicians, policymakers and scholars to
consider what other possible factors could be responsible for corruption so that proper policies
and strategies can be formulated and implemented to tackle this global problem.

6. Conclusion
The main purpose of this paper is to add a methodological contribution to the study of the
relationship between corruption and E-government through considering a probabilistic
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structure observed in the data. A probability reduction approach to empirical modeling was
used whereby a statistical model was derived from data irrespective of the theory being
tested or the substantive meaning behind the data. Once a statistically valid model is
derived through thorough misspecification testing and EDA, the model is used to test the
theory. A global heterogeneous panel data set from 176 countries covering years from 2003
to 2014 was used in this study. No evidence was found that E-government reduced
corruption after rigorously testing the idea. On the other hand, strong evidence for the
positive impact of government effectiveness, civil liberties and the economic status of the
country in reducing corruption was found and there is some evidence for the effect of per
capita GDP. There is no evidence that inflation and political rights have any corruption
reducing effect. Case studies in the literature have indicated that E-government seemed to be
a useful tool for increasing efficiency, effectiveness and transparency, ultimately helping to
curb corruption. However, the evidence from the large heterogeneous panel data set in this
study showed that no relationship exists between E-government and corruption. Any
evidence for such an association is now murky at best.
Corruption cannot be measured. Only the perception of corruption can be measured.
Mauro (1995) concluded that no single action can achieve more than limited improvement in
control of corruption and there needs to be major changes to existing policies. Reforms of
democratic accountability are unquestionably important for many anticorruption efforts
(Bauhr, 2017). Democratization and media freedom are complements in the fight against
political corruption (Bhattacharyya and Hodler, 2015). A decrease in the level of perceived
corruption is more significant in non-OECD countries through increasing relative wages in
government (An and Kweon, 2017) and even culture can be a factor in the perception of
corruption (Salmon and Serra, 2017). As a result, the multi-dimensional nature of corruption
may require different measures of control. Relying only on one measure may misinform or
undermine other potential issues.

6.1 Implications to theory

This research adds a methodological contribution by applying a probability reduction
approach to examining the relationship between E-government and corruption. By doing
this, it tries to address one of the issues raised by Heeks and Bailur (2007) who found a lack
of rigorous research methods in E-government study. The link between corruption and E-
government is not as theoretically obvious or straightforward as it has been portrayed. This
study fails to find the evidence for the positive effect of E-government in reducing
 TG corruption. Rather, government effectiveness and the economic status of a country explain
12,2 much of the variation in corruption level across countries.

6.2 Practical implications

Different concepts of digital government have been practiced around the world with
groundbreaking changes in ICTs. Digital government has been practiced for the purpose of
144 reinventing government and politicians and policymakers and theorists aim to use it to increase
the efficiency, effectiveness, accountability and transparency of government. As a result, they
aim to use E-government as a corruption reduction tool. However, the findings from this
empirical study demonstrate that the evidence for the effectiveness of E-government in reducing
corruption is weak, especially when compared to other factors. Hence, policymakers should
focus on other potential factors such as socio-economic status, good governance, press freedom,
culture and transparency along with improving digital government to combat against.
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6.3 Key lessons learnt

Sincere care has to be taken to ensure that a probabilistic structure including factors such as
time dependence, heterogeneity and non-linearity is captured by the model. Only such
models provide reliable grounds for testing any theory of corruption and E-government.
Economic status, political stability and government effectiveness play a more important role
in reducing corruption than E-government.

6.4 Limitations of the research

One of the empirical limitations of this study is the nature and period of data. The limited
time span of the data makes it difficult to model time dependence and lagged effects. Non-
normality and non-linearity are dealt in this research with non-linear transformations of the
original variables. Even so, perfect normality and symmetry of the histograms were not
achieved.
Other limitations concern the variables included in the study. For example, this study
includes and examines some important variables associated with corruption but it does not
include all. Therefore, further research studies including newer potential variables such as
national culture, poverty, religion, and geography are encouraged.

6.5 Future research recommendations

“The proof of the pudding is in the eating” (Atkinson, 2015). Future research can focus on
developing a single time-invariant model capturing lagged effects of corruption and non-
normality of the data together. In addition, other potential variables such as culture and
religion should be included in the model so that more research questions can be answered.

Notes
1. South Korea remained at first place on the E-government development index (EGDI) (UN E-Govt.
Surveys, 2014 and 2016) from 2012 to 14 and it is presently at second place but is number 52 on
the corruption perception index (CPI) (Transparency International, 2016).
2. The assumption of normality needs to be valid to estimate linear regression models.
3. Until 2011, Corruption perception index (CPI) was measured between the range of 0 to 10 where 0
indicated the most corrupt and 10 indicated the least corrupt country. However, after 2012, it is
measured at the range of 0 to 100 indicating zero as the most corrupt and 100 the least corrupt.
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org/10.5901/ajis.2013.v2n8p712
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Sheryazdanova, G.R., Abdina, A.K., Abdildina, H.S., Kakimzhanova, M.K., Sadykova, T.M. and
Gappasova, A.G. (2016), “Development of electronic government in Kazakhstan as a tool to
combat corruption”, Indian Journal of Science and Technology, Vol. 9 No. 5, pp. 1-7, available at:
https://doi.org/10.17485/ijst/2016/v9i5/87617
Vieira, J.B. (2013), “The impact of public transparency in fighting corruption”, Journal of Democracy,
Vol. 5 No. 1, pp. 80-106.
 TG Appendix 1
12,2

148
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Figure A1.
Average of the
variables under study
across time for the
countries considered
 E-government

149
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Figure A2.
Histograms of
original variables
(left) and transformed
variables (right)
 TG
12,2

150

Figure A3.
Scatter plot of GDP
per capita and CPI
before transformation
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Figure A4.
Scatter plot of
transformed GDP per
capita and CPI

Appendix 2
The model assumptions are specified as follows for each model:

DGP : Yit ¼ a0it þ a1t Xit þ ut

Assumptions:
 [1] Normality: Yit  N ð:; :Þ
 [2] Linearity: E ðYit Þ ¼ a0it þ a1t Xit
 [3] Homoscedasticity: VarðYit Þ ¼ t t 2
 [4] Independence: ðYit ; Xit Þ is independent process:
 [5] (i, t)–invariance: a0t ; a1t ; t t 2 are ði; tÞinvariant
For all (i, t) = 1, 1, 3, . . .
 Appendix 3 E-government

Model 1 Model 2 Model 3

E-governance 1.192 [0.655] 0.923 [0.653] 0.000 [0.361] 151

Real GDP per capita 0.000 [0.934] 0.000 [0.031] 0.002 [0.120]
Inflation 0.007 [0.739] 0.024 [0.130] 0.000 [0.879]
Political rights = 2 0.593 [0.780] 1.525 [0.343] 0.000 [0.602]
Political rights = 3 1.258 [0.501] 1.519 [0.284] 0.000 [0.825]
Political rights = 4 1.208 [0.444] 1.594 [0.183] 0.000 [0.454]
Political rights = 5 2.344 [0.115] 1.751 [0.119] 0.000 [0.859]
Political rights = 6 1.027 [0.445] 0.773 [0.445] 0.000 [0.574]
Political rights = 7 2.232 [0.069] 1.968 [0.034] 0.000 [0.593]
Civil liberties = 1 5.643 [0.034] 3.740 [0.064] 0.000 [0.708]
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Civil liberties = 2 3.823 [0.106] 3.709 [0.039] 0.001 [0.433]

Civil liberties = 3 3.283 [0.119] 3.029 [0.057] 0.000 [0.710]
Civil liberties = 4 2.253 [0.232] 2.120 [0.137] 0.000 [0.909]
Civil liberties = 5 2.708 [0.080] 1.635 [0.161] 0.000 [0.988]
Civil liberties = 6 0.898 [0.503] 0.860 [0.401] 0.000 [0.516]
Political stability 0.511 [0.324] 0.306 [0.569] 0.000 [0.448]
Government effectiveness 8.967 [0.000] 4.136 [0.000] 0.001 [0.048]
Lag (CPI) 0.560 [0.000] 0.952 [0.000]
Lag (GDPPC) 0.000 [0.036] 0.002 [0.118]
Lag (inflation) 0.001 [0.939] 0.000 [0.170]
Lag (political stability) 0.209 [0.716] 0.000 [0.713]
Lag (government efficiency) 2.019 [0.036] 0.000 [0.721]
Table AI.
Note: Italic values mean statistically significant at 5% Models 1-3
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TG
12,2

152

Model 4
Table AII.
2003 2004 2005 2008 2010 2012 2014

(Intercept) 1.029 [0.000] 1.030 [0.000] 1.033 [0.000] 1.032 [0.000] 1.033 [0.000] 1.033 [0.000] 1.034 [0.000]
E-governance 0.001 [0.699] 0.001 [0.732] 0.000 [0.868] 0.003 [0.121] 0.002 [0.333] 0.004 [0.032] 0.003 [0.148]
Rea GDP per capita 0.001 [0.005] 0.000 [0.048] 0.000 [0.162] 0.000 [0.028] 0.000 [0.637] 0.000 [0.625] 0.000 [0.481]
Inflation 0.000 [0.730] 0.001 [0.365] 0.000 [0.943] 0.001 [0.148] 0.000 [0.964] 0.000 [0.634] 0.000 [0.539]
Political rights = 2 0.000 [0.860] 0.001 [0.368] 0.000 [0.871] 0.000 [0.955] 0.000 [0.829] 0.001 [0.741] 0.000 [0.958]
Political rights = 3 0.001 [0.489] 0.001 [0.541] 0.000 [0.974] 0.000 [0.781] 0.000 [0.636] 0.000 [0.870] 0.000 [0.871]
Political rights = 4 0.000 [0.898] 0.000 [0.957] 0.001 [0.379] 0.000 [0.649] 0.001 [0.231] 0.000 [0.856] 0.000 [0.887]
Political rights = 5 0.001 [0.746] 0.000 [0.973] 0.000 [0.866] 0.000 [0.800] 0.000 [0.993] 0.000 [0.671] 0.001 [0.240]
Political rights = 6 0.001 [0.499] 0.001 [0.181] 0.001 [0.177] 0.000 [0.947] 0.000 [0.778] 0.001 [0.495] 0.001 [0.269]
Political rights = 7 0.000 [0.980] 0.001 [0.450] 0.001 [0.352] 0.001 [0.124] 0.000 [0.692] 0.000 [0.939] 0.001 [0.128]
Civil liberties = 2 0.001 [0.568] 0.000 [0.824] 0.001 [0.708] 0.002 [0.252] 0.002 [0.183] 0.004 [0.042] 0.005 [0.005]
Civil liberties = 3 0.003 [0.197] 0.002 [0.325] 0.001 [0.354] 0.001 [0.345] 0.001 [0.531] 0.003 [0.054] 0.005 [0.004]
Civil liberties = 4 0.002 [0.340] 0.000 [0.852] 0.000 [0.948] 0.001 [0.31] 0.001 [0.549] 0.003 [0.030] 0.004 [0.004]
Civil liberties = 5 0.001 [0.577] 0.001 [0.544] 0.000 [0.706] 0.002 [0.113] 0.001 [0.244] 0.004 [0.009] 0.005 [0.001]
Civil liberties = 6 0.001 [0.439] 0.000 [0.972] 0.000 [0.658] 0.002 [0.056] 0.002 [0.049] 0.003 [0.014] 0.005 [0.000]
Civil liberties = 7 0.001 [0.607] 0.001 [0.521] 0.001 [0.498] 0.001 [0.263] 0.001 [0.075] 0.002 [0.079] 0.004 [0.003]
Political stability 0.000 [0.000] 0.000 [0.000] 0.000 [0.000] 0.000 [0.000] 0.000 [0.000] 0.000 [0.001] 0 0.000 [0.013]
Government effectiveness 0.003 [0.000] 0.003 [0.000] 0.004 [0.000] 0.004 [0.000] 0.004 [0.000] 0.004 [0.000] 0.004 [0.000]

Note: Italic values mean statistically significant at 5%

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2003 2004 2005 2008 2010 2012 2014

(Intercept) 1.038 [0.000] 1.039 [0.000] 1.041 [0.000] 1.034 [0.000] 1.035 [0.000] 1.034 [0.000] 1.034 [0.000]
E-government 0.001 [0.674] 0.000 [0.731] 0.001 [0.665] 0.003 [0.108] 0.002 [0.368] 0.004 [0.034] 0.003 [0.162]
Rea GDP per capita 0.000 [0.671] 0.000 [0.078] 0.001 [0.021] 0.000 [0.419] 0.000 [0.734] 0.000 [0.932] 0.000 [0.632]
Inflation 0.000 [0.754] 0.001 [0.401] 0.000 [0.703] 0.001 [0.203] 0.000 [0.792] 0.000 [0.602] 0.000 [0.526]
Political rights = 2 0.000 [0.994] 0.001 [0.624] 0.000 [0.745] 0.000 [0.959] 0.000 [0.946] 0.000 [0.759] 0.000 [0.996]
Political rights = 3 0.001 [0.621] 0.000 [0.755] 0.000 [0.793] 0.000 [0.696] 0.000 [0.668] 0.000 [0.878] 0.000 [0.835]
Political rights = 4 0.000 [0.827] 0.000 [0.995] 0.001 [0.258] 0.000 [0.622] 0.001 [0.263] 0.000 [0.823] 0.000 [0.840]
Political rights = 5 0.001 [0.720] 0.000 [0.997] 0.001 [0.533] 0.000 [0.749] 0.000 [0.989] 0.000 [0.703] 0.001 [0.224]
Political rights = 6 0.000 [0.782] 0.001 [0.197] 0.001 [0.351] 0.000 [0.972] 0.000 [0.825] 0.001 [0.498] 0.001 [0.258]
Political rights = 7 0.000 [0.678] 0.001 [0.374] 0.000 [0.471] 0.001 [0.123] 0.000 [0.639] 0.000 [0.93] 0.001 [0.123]
Civil liberties = 2 0.001 [0.692] 0.000 [0.840] 0.000 [0.927] 0.002 [0.294] 0.002 [0.143] 0.004 [0.048] 0.005 [0.006]
Civil liberties = 3 0.003 [0.187] 0.001 [0.340] 0.001 [0.487] 0.001 [0.421] 0.001 [0.437] 0.003 [0.066] 0.005 [0.004]
Civil liberties = 4 0.002 [0.371] 0.000 [0.875] 0.000 [0.843] 0.001 [0.355] 0.001 [0.475] 0.003 [0.041] 0.005 [0.004]
Civil liberties = 5 0.001 [0.618] 0.001 [0.524] 0.000 [0.988] 0.002 [0.120] 0.001 [0.202] 0.003 [0.013] 0.005 [0.001]
Civil liberties = 6 0.001 [0.556] 0.000 [0.880] 0.000 [0.946] 0.002 [0.062] 0.002 [0.041] 0.003 [0.017] 0.005 [0.000]
Civil liberties = 7 0.000 [0.907] 0.001 [0.412] 0.000 [0.691] 0.001 [0.299] 0.001 [0.066] 0.002 [0.087] 0.004 [0.003]
Political stability 0.000 [0.000] 0.000 [0.000] 0.000 [0.000] 0.000 [0.000] 0.000 [0.000] 0.000 [0.001] 0.000 [0.013]
Government effectiveness 0.003 [0.000] 0.003 [0.000] 0.004 [0.000] 0.004 [0.000] 0.004 [0.000] 0.004 [0.000] 0.004 [0.000]
Poor 0.004 [0.002] 0.003 [0.000] 0.004 [0.000] 0.001 [0.367] 0.001 [0.291] 0.000 [0.740] 0.000 [0.958]
Rich 0.001 [0.152] 0.001 [0.157] 0.002 [0.001] 0.000 [0.638] 0.001 [0.257] 0.000 [0.835] 0.000 [0.801]

Note: Italic values mean statistically significant at the 0.05 level

E-government

Model 5
Table AIII.
153
 TG About the authors
12,2 Devid Kumar Basyal is currently a PhD Candidate at Department of Public Administration, Incheon
National University, South Korea. He received his MPhil/MA in Economics from Tribhuvan
University, Nepal and MBA from University of Gloucestershire, UK. He has more than 12 years of
teaching experience at graduate and undergraduate level. He has published articles in different
national and international journals. He has presented papers at national and international
conferences in Korea, China, Nepal and the UK. His research interests include e-government, social
154 media, tax administration and social issues. Devid Kumar Basyal is the corresponding author and
can be contacted at: devidbasyal@inu.ac.kr
Niraj Poudyal is working as Assistant Professor of Econometrics at Kathmandu University School
of Arts for last two years. He did his PhD from Virginia Tech, USA on theory testing and statistical
adequacy of DSGE models. He has published his research articles in national and international
journals, such as PLOS ONE and Journal of Public Management and Social Policy. He has published
two versions of R package StVAR. He has taught econometrics at Virginia Tech, USA, Kathmandu
University and Pokhara University, Nepal.
Jin-Wan Seo is a Professor at Department of Public Administration, Incheon National University,
Downloaded by Mr Devid Basyal At 02:36 16 August 2018 (PT)

South Korea. He received his PhD in Political Science from University of Delaware, USA. His
research/professional interests include E-governance, E-government, social media, public
administration and internet research methodology. He has published five books and a number of
articles in different national and international journals. In the past, he has served as an expert of the
Presidential E-government Committee, Korea. Jin-Wan Seo is the corresponding author and can be
contacted at: sjinwan@inu.ac.kr

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