Direct public funding (DPF) of political parties is expected to undermine their propensity to engage in illicit funding. This expectation rests on the assumption that DPF will alleviate the fundraising burden and weaken party-donor linkages regarded as a source of corruption. Despite this assumption, empirical evidence points to the heterogeneous effects of DPF on the integrity of the political process. Yet existing research on party funding/DPF-corruption linkage suffers from a critical shortcoming. It relies exclusively on the regulatory scope of the political financing regime (PFR), typified by aggregate indexes, dichotomous indicators, or other proxy measures that fail to account for the cross-national and within-country variation in DPF.
This pioneering study overcomes this limitation by using actual data on DPF as an explanatory variable to investigate whether a higher DPF level reduces political corruption. To test this argument, it uses panel data models and an original dataset on the DPF level across 27 post-communist regimes between 1990-2020. The results of fixed-effects and random-effects within-between estimations point to a differential effect of DPF on corruption. On average, those post-communist regimes that provided more generous state support to political parties at the outset of transition recorded lower corruption levels, but this negative effect diminishes over time. Thus, considering corruption resilience, more generous state support of political parties during early democratisation might have entailed long-term positive benefits by affecting the initial corruption level.