Causes of Corruption in European Countries: History, Law, and Political Stability Ronald MacDonald Muhammad Tariq Majeed* University of Glasgow University of Glasgow Abstract This study asks why corruption is increasing in European countries and what are the most important factors that explain such corruption? Although corruption scandals, speeches and reports indicate that corruption persists in European countries no one has tested the causes of corruption in European countries and this study is, to the best of our knowledge, the first to empirically examine the causes of corruption for European countries. Cross-country data for European countries is used to examine the role of legal influences, historical factors and the effect of political stability on corruption. Five key findings are: (1) the effects of the legal strengths on the incidence of corruption are significant with a negative sign - a one-standard-deviation increase in the legal strengths is associated with a decrease in corruption of 0.26 points, 26% of a standard deviation in the corruption index; (2) political stability is a significant determinant of corruption; (3) the interactive effects of history and law are important in reducing corruption levels; (4) the size of government matters in affecting corruption levels; (5) finally, this study shows that an interdisciplinary approach is the most appropriate way to explain corruption. Key Words: History; Law; Political Instability; Corruption; European Countries JEL Classification: K0, O52, P37, C33, H0 Acknowledgement: this paper has benefited from comments received from participants at the First German ECSA Young Researcher Conference, 21-23 February 2011, Berlin Germany. Conference Topic: Europe’s Post-Crisis Stability – An Interdisciplinary Approach organized by German ECSA Arbeitskreis Europäische Integration (AEI) and ZEW Mannheim European Academy Berlin Bismarckallee 46/48 D-14193 Berlin Germany http://www.eab-berlin.de/ . *Corresponding author: Department of Economics, Adam Smith Building, Glasgow, G12 8RT, United Kingdom; Tel: +44 (0)141-330 4697; Fax: +44 (0)141-330 4940; m.majeed.1@research.gla.ac.uk or tariq@qau.edu.pk . The author also wishes to thank Arbeitskreis Europäische Integration (AEI) and ZEW Mannheim European Academy Berlin Bismarckallee for proving travel grant to present this paper. 1