CORRUPTION IN GOVERNANCE: THE GENDER BALANCE PERSPECTIVE. EVIDENCE FROM NIGERIA USING SVAR MODEL

CORRUPTION IN GOVERNANCE: THE GENDER BALANCE PERSPECTIVE. EVIDENCE FROM NIGERIA USING SVAR MODEL

INTRODUCTION

The subject of corruption has been a topical issue on the front burner of developed and developing economies. Corruption is observed not only to limit the functional implementation of both monetary and fiscal policies but also has widened the income equality gap, thus leading to reduced economic growth. In recent times, corruption has led to public and private officials increasing public expenditure in what is often termed as “budget padding” to accommodate personal income and luxurious lifestyle. This obnoxious trend has regularly featured high budgetary estimates of spending on paper, which does not often translate to actual physical infrastructural development. Thus, corruption, in essence, reduces the amount of revenue income available to the state for public and private investments, reduces the citizen’s trust in governance and weakens the performance of macroeconomic policies.

In some countries where corruption has severely prevailed, governance is being impeded, and citizen’s trust eroded. Democratic governance, which is “government for the people and by the people,” has suffered a severe setback under lousy leadership. Poor management in governance undermines institutional structures, enforces bureaucratic bottles necks and rigidity, reduces freedom of the press and enthrones mediocrities in government positions, which at the same time undermines human rights freedom. These factors culminate in a reduction in the pace of development of the country. It will also lead to sectional lopsidedness in the distribution of resources and budgetary allocations to the various components of the sectors of the economy.

Studies that exist on gender balance and equality suggest that men in government perpetrate corruption more (Gottfredson and Hirschi, 1990). Some other studies have also shown that women are more intolerable to criminality, deceits and social vices, primarily when found in governance. Usually, the concern of the woman is how to ensure that the society is treated justly and equitably. However, it may be observed that gender issues as related to governance are not solely based on women as being light-minded sociable but in their ability to be more organized, sincere and often seeking perfection in office.

Recently, the nations have witnessed increase participation of women in governance and politics. Some countries even have women as their President and head of Parliaments.  This position is more so because liberal democracy seeks to promote gender equality and good governance. Rivas (2008) had observed that if a woman is heading a public institution, then the firm is also assumed to be a woman: therefore, in such a firm, the possibility of accepting a bribe is low, and the option of choosing alternative corrupt practices is less available.

A study by Transparency International (2010) adduced reasons for women inability to engage in corrupt practices while in governance as:

(1) lack of access to resources (women tend to have already reduced control over household resources, making such payments on their own becomes difficult or impossible,

(2)  women are primary users of public services; as such will not spend exceedingly to obtain services,

(3) being marginalized from decision-making processes, women will usually try to put it their best to prove their efficiency and effectiveness in governance.  Branisa and Ziegler (2011) had posited that “If one accepts that women are less selfish and align their actions on higher moral standards than men, having women in significant political and economic positions might lead to less corruption in a country.

The causal relationship between corruption and income inequality has been variously demonstrated with the dynamic linkages adequately established. While there has been an increasing outcry about increasing women’s participation in governance, however, little or much is said about using gender balance in governance to reducing corruption, especially in Nigeria. Studies on corruption have been based basically on the economic effect of corruption. The paper also intends to examine whether increasing gender balance in governance will reduce the level of corruption as well as improve governance efficiency in Nigeria.

Literature Review

Studies have shown that corruption is more perverted by public officials within higher and middle income class in the society, while the worst hit are people of the lower income class. The high and middle-income level public workers are often the policymakers and hence evolve policies that will accentuate the transfer of wealth from the lower class to the higher class thus, widening the income inequality gap. According to  Dwiputri, Arsyad, and Pradiptyo, (2018) in the implementation of bribery and extortion, public officers of the higher and middle-income class have more options and resources to pay for extortion, bribe and manipulation of public expenditure projects than the lower-income class public workers.

The increasing rate of corruption amongst private organizations has also received some attention. Uslaner (2011) demonstrated that income inequality had been exacerbated by the low level of trust between and among groups. In most private organizations, workers who have a close affinity with the executive directors or principals of the organization receive the preference of enhanced salaries. Thus, conditions that allow people who have greater trust within the private groups than they do in the outside group increase the incidences of corruption. Uslaner (2007) argues that higher income inequality can cause lower trust, and the lower trust lead to higher corruption. Therefore, higher corruption can contribute to higher income inequality.

Several researchers have attempted to establish the link between income inequality and corruption in both developing and developed nations. Though the pathway has been unclear, notionally, it has been found that a wide income inequality gap reduces the wealth distribution between the rich and the poor. According to Samadi and Farahmandpour (2013), many resources are at the disposal of the rich as a result of the vast inequality between the rich and the poor. This characteristic sets the rich at the advantage position of lobbying, bribing and forcing their way into political positions in governance. Furthermore, Yu and Khagram (2005) observed that the widened gap in income inequality places the poor at the poverty end of not being able to meet their increasing needs. The inability of the poor to meet increasing social and health costs in the society will place them at the vulnerable position of seeking redress by also accepting bribes for services provided. This antecedent is the vicious circle of corruption and thus makes it difficult to assess where the fight against corruption should be targeted.

Although economists do not have a common position on the exact effect corruption has on economic growth, it has been proven by many authors that corruption lowers the value for money invested in human capital development in terms of inefficient utilization of public resources and the number of persons trained with respect to resources expended (e.g. Bardhan, 1997; Azariadis and Lahiri, 2002; Ehrlich, 1999; Mauro, 1995). Similar to this, authors also hold that corruption increases criminal activities such as kidnapping, money laundry, illicit trade, tax evasion, and misuse of public properties (Beck and Maher.,1986, Lien, 1986).

Even though authors do not agree on the exact effect that corruption has on economic growth (whether negatively or positively), there seems to be a consensus on the fact that corruption must have a unique pathway that it passes through to effect economic growth. Mo (2001), Pellegrini and Wacziarg (2001), Obamuyi and Olayiwola, (2019) posit that the transmission channel of corruption to economic growth is via investment, human capital, government expenditure, inflation and political instability. Mohamed (2013) found out that besides the previously identified channels, corruption also exerts its influence on economic growth through government expenditures and political instability. However, the five transmission channels highlighted above are macroeconomic variables. At the micro-economic level, some researchers have established that corruption affects the economy via the primary sources of income growth.

Corruption has also been said to have a substantial effect on income inequality and wealth distribution amongst countries. Countries, both the developed and developing countries, have a strong desire to improve the well being of its citizens through the reduction of poverty rate, enhancing social and economic welfare, and adequate distribution of income. Mainly, efficient income distribution is known to reduce the gap between the rich and the poor. Countries have developed several economic policies that are geared towards improving economic development. Such policies are targeted at programs that will enhance social and economic well being, reduce income differential gaps and efficient wealth distribution. Improvement in citizens well being is known to guarantee economic development through growth in the quality of life of the citizens and an increase in human capital development. Thus, anything that interferes with these programs and policies will ultimately affect the economic development and growth of that nation. Therefore corruption has been identified as a pervasive obstacle to economic growth and social development. Most countries that are poor are observed to be suffering from severe corruption situation (Wang and You).

There has been an increasing request to mainstream gender balance in the fight against corruption. According to Sida (2015), gender balance is achieved when women and men, boys and girls have equal rights, life prospects and opportunities, and the power to shape their own lives and contribute to the development of the society. Corruption is said to disproportionately affect the poor, illiterate and those who are not aware of their rights (Sida, 2015). Women are said to be more adversely affected by corruption and poverty than men in society because they are more vulnerable. Women are also the recipient of always depending on men for daily upkeep and thus may not have many funds to spare for corrupt officials or to persons holding political power.

A study carried out by Transparency International (2016) suggests that women seek to pursue separate political agenda than men when found in public offices. For instance, (a) women will attempt to pursue improvement in public service delivery that will benefit women and children (b) to break up male chauvinism collusive network and further prove that they can also do better what the men are found doing. This latent intention perceived to be exhibited by women places them at a position where there are fewer risk-takers in society.

Esarey and Chirillo (2013), Esarey and Schwindt-Bayer (2017), studies using cross-sectional data have demonstrated that a more significant number of females elected into assemblies and parliaments have reduced corruption and governance with the causality running in both directions. Studies that attempt to justify the inclusion of women in governance has been based on the premise that women are more risk-averse than men. Since corruption is a criminal offence that attracts punishment, women are more afraid of being punished publicly (a disgrace that most women would not want to face). Thus, women seek accountability while in public office and would work assiduously to promote good governance and reduce the extent of corruption in public offices.

Taxonomy of countries identifiers

This section describes the rating of countries represented as less corrupt and more corrupt. Ten countries are compared with respect to their corruption index, women in governance, governance effectiveness, innovation and economic decline.

Source: world bank

Governance effectiveness indicates the quality of public service and the degree of independence from legislators. The figure above demonstrates that Nigeria had a negative value of -1.02 for governance effectiveness. This is the highest amongst the low-income countries studied. This figure indicates that the public service is entirely swallowed by the legislative organ of government. A look at the extent of women’s involvement in governance revealed that Nigeria was trailing behind other countries with 3.38 percent. This value, when compared with similar low-income countries like Algeria, Bangladesh and Albania were abysmally small, mainly when these countries had 25%, 20% and 29%, respectively. This situation speaks volumes regarding that the extent of women’s involvement in governance, holding political or heading offices at a leadership level.

Another subject of the discourse is the extent of economic decline faced by the countries under study. The figure above revealed that Nigeria stands at the upper pedestal of economic downturn with an average point of 7.8 when compared with Sweden, Denmark and Norway that have 1.50, 1.60, 1.90, respectively. The analysis above indicates that Nigeria has a low level of governance effectiveness as well as a low level of women involvement of governance.

Methodology of Research

Much of the literature so far reviewed had focused on the potential effect of income inequality and corruption. Little is studied about how mainstreaming of gender balance might improve governance efficiency and reduce fraud. The variables captured for this study will include corruption index, income inequality, governance efficiency, women in parliament and economic growth

The paper will utilize the Structural Variance Autoregressive (SVAR) model using annual data from 2001-2019. Data were sourced from the World Bank Indicators (2019). All variables apart from economic growth appear as index form. The justification for adopting the SVAR model for this study is based on its unique ability to investigate the dynamic behaviour amongst interactive variables and financial time series forecasting. The SVAR model regards all variables as endogenous variable and each variable having a lagged value of itself in the form below

Yt = c + β₁Y_t-1 + β₂Y_t-2 ­+ …………… β_pY_t-p + ε_t

Where β₁ are (n x n) coefficient matrices and ε_t is an (nx1) unobservable zero-mean white noise vector process (serially uncorrelated or independent) with time-invariant covariance matrix Σ

The paper will adopt the SVAR methodology established by Mordi and Adebisi (2010) where the Nigerian economy was described in a structural form as

Ɣ₀y_t = Ɣ(L)y_t-1 + ε_t

Where Ɣ₀ is the contemporaneous coefficient matrix: V(L) is a matrix of polynomial in the lag operator L, y_t is an nx1 data vector that includes {EGT, INEQ, CI, GE, WIN}. EGT stands for Economic growth; INEQ, stands for income inequality index: CI represents Corruption index,  GE represents Governance Efficiency index, and WIN represents women in parliament index, εt is a vector of nx1 serial uncorrelated structural disturbances.

The reduced form of the VAR model is

Y_t = M(L)y_t-1 + µ_t

 _where (L) ₌ Ɣ_o^-1 Ɣ(L) is a matrix of polynomial in the lag operator L and var (u_t) = Ψ

From equation 1, the following restrictions are applied to the contemporaneous structural parameters. Following An and Sun (2008) specifications zero restrictions are placed on contemporaneous structural parameters, whereas no limits are imposed on the lagged structural parameters

1       0      0      ƒ₁₅  ƒ₁₅                CI                            CI             ε_Ci

0       1      0      0      0                 GE                          GE             ε_GE

                0         0        1      0       0              GRT      =   K(L)      GRT    +    ε_GRT

               ƒ₄₁    ƒ₄₅    0      1     ƒ₄₅                WIG                       WIG          ε_WIN

                   0       0        0        0         1                   INEQ                              INEQ         ε_INEQ

ε_EGT,  ε_INEQ,   ε_CI, ε_GE  ε_WIN are structural disturbances on Economic growth, Income Inequality index, Corruption index, Governance Efficiency index and index of Women-in-Parliament.

The Transparency International corruption perception index will measure the level of the country exposure to corruption. Income inequality will be measured by the Gini coefficient index; women in parliament are the percentage of parliamentary seats in a single or lower chamber held by women. In contrast, the governance effectiveness index captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies.

The VAR model permits the prediction of the current variable based on its past lag. This implies that the value of the current variable may depend on the values of its past lags. This paper, therefore, suggests that the current value of corruption in Nigeria may depend on the failure or successes of the governance index, innovations, economic growth, etc. Thus, the outcome equation and the predictive equation may be estimated separately in a two-step procedure using the autoregressive modelling approach.

The study shall also utilize the Impulse Response Function (IRF) test to determine how each of the variables responds to shocks/innovations from either itself or shocks/innovations from other interactive variables. the primary importance of adopting the IRF test is examine how the shocks from the variable will determine the behavior of other variables per period.

Empirical Results

The model used in this study is justified with 15 zero restrictions. The likelihood test for over-identification suggest that restrictions cannot be rejected at the conventional significance level with Chi-Square (5) = 55.733 and a p-value of 0.0000.

Table 1 reports the estimated contemporaneous coefficient in the structural model.

1.0000           0.0000           0.0000             -0.5985              0.9609

0.0000           1.0000           0.0000              0.0000              0.0000

0.0000           0.0000           1.0000              0.0000              0.0000

-0.0335           3.2000*         0.0000              1.0000             -0.3787*

0.0000           0.0000           0.0000              0.0000              1.0000

Note * denoted significance level at 1%

The result shows that women in governance (WIN) and Corruption (CI) contemporaneously exert a dual effect on each other. The first instance is the effect of corruption on women in parliament. The result observed that corruption exerts a negative and insignificant impact of 3 percent on women in parliament (f₄₁<0). An increase in corruption will influence women in governance contemporaneously by 3 percent. This result shows that women are observed to be less influenced by corruption if found in parliaments. The second instance is the influence of women on reducing the level of corruption. The result observes that women in parliament have the ability to reduce corruption by 59 percent (f₁₄<0). The above result reveals that women in governance (WIN) react negatively to innovations in income inequality. An increase in women in governance (WIN) will significantly reduce income inequality (INEQ) by 37 percent (f₄₅<0) and increase governance efficiency (GE) by 3.20 (f₄₁>0). This result is significant and, however, reveals that women, if allowed to exercise more authority in governance, will improve governance efficiency by over 300 percent. The result further shows that corruption has a positive impact on inequality. An increase in corruption will increase inequality (f₁₅>0) by 95 per cent although this relationship is observed not to be significant.

Granger Causality

Granger causality test was performed on the structural variables. The result, which was estimated at 0.5 percent level of significance, revealed that women in governance (WIN) had uni-directional causality on Corruption (CI). Income inequality (INEQ) also had uni-directional causality on Corruption (CI). Women in governance and Income inequality had bi-directional causality.

Impulse Response Functions

Impulse response functions are simulations of how overtime endogenous variables respond to shocks within the system over some time. Table 1.4 shows the dynamic response of women in governance to corruption, governance efficiency, Income inequality and growth rate. The result shows that women in governance negatively reduce corruption in the 1^st quarter, and this reduction is observed to continue even up to the 10^th period. Women in governance have an immediate positive increase on economic growth in the 1^st period. This increase is seen to persist up to the 4^th period when it began to experience a decline. Women in governance are observed to have a sudden definite increase in income inequality in the 1^st period. Still, this increase did not last long as it was found to experience a sudden decrease in the 2^nd period. This decrease remained negative up to the 10^th period. As regard governance efficiency, the variable initial response to women in governance was negative in the 1^st period. However, the variable gradually began to experience an increase and become positive at the 5^th period up to the 10^th period.

Variance Decomposition

Variance decomposition shows the impact of the different structural shocks on Women in Governance, Corruption, Governance Efficiency, Economic Growth and Income Inequality. The result for variance decomposition presented in fig 3 and 4 reveal that women in governance had a 0.2 percent increase in corruption in the 1^st period. This effect gradually increases from 10 percent in the 2^nd period to 21 percent in the 10^th period. Women in governance increase economic growth by 14 percent in the 1^st period. This increase in steadily observed from 17 percent in the 2^nd period to 23 percent onto the 10^th period. Furthermore, income inequality is seen to increase by 6.4 percent in the 2^nd period, but this effect fizzles out from 6.1 percent in the 3^rd period to 4.6 percent in the 10^th period. The above result proves that women in governance increases governance efficiency and reduces corruption and income inequality.

Summary and conclusion

The study examined the importance (if any) of mainstreaming gender balance in governance if Nigeria must win the fight against corruption. The study utilized the SVAR methodology to study the structural relationship between the variables of women in parliament, corruption index, governance efficiency, income inequality and economic growth. The data used for the study were obtained from the World Bank repository from data 2001 – 2019.

The study observed that a dual interactive structural relationship seem to exist between women in governance and corruption index. In contrast, other fundamental variables were found to exert a single direct link with each other. This bi-directional relationship in this study corroborates with the observations of Esarey and Schwindt-Bayer (2017). The following vital striking views are significant from this study.  (1) Women in governance are minimally influenced by corruption when found in position of governance (2) Women in governance was observed to reduce the level of corruption (3) women in governance was seen to reduce the wide gap in income inequality and as well improve governance efficiency. The views and observations from this study confirm previous observations posited by Bauhr, Charron and Wängnerud (2015), Goetz, Anne Marie (2007) and Transparency International (2014).

This study amplifies the thoughts of many researchers that the new wave of fighting corruption and improve the quality of governance is to elect/appoint more females into the position of governance. The study serially observed that women are more prone to push for agenda that will reduce corruption and income inequality than men since they are more risk-averse.

Conclusively, sustaining the dividend of governance, which include the provision of basic health care services, improve the quality of livelihood and equity in the distribution of income does not only require the establishment of good governance regimes but rather, governance that is all-inclusive of gender balance.

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