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Abstract

In the early 2000s, corruption permeated almost every facet of daily life in Lithuania. Yet, by the next decade, Lithuania’s successes in combatting corruption were being heralded as a template for other nations. How did this occur? Extensive research has demonstrated that international integration may reduce domestic corruption; this paper examines whether integration had the same impact in Lithuania. We examine two mechanisms associated with international integration, the processes of norm development and economic growth, arguing that, together, they facilitated the rapid decrease of corruption in Lithuania. To explore this relationship, we conduct a document and literature analysis, finding that periods of anti-corruption reform were closely linked to the aspirations for deeper EU integration. We then adapt Bai et al.’s (2013) corruption and inter-regional competition model and apply it to Lithuania. Using survey data collected from over 900 Lithuanian firms between 2002 and 2018 and an Instrumental Variable (IV) strategy based on a Bartik shift-share instrument, we find that economic growth decreased the commonality of bribe extraction in Lithuania. We also find that this effect was greater for more mobile firms and industries that were better prepared to take advantage of increased integration. This paper’s results suggest that the normative and economic mechanisms associated with international integration contributed to a reduction in corruption in Lithuania and, more broadly, contribute to a growing subfield of literature on the political economy of corruption.

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