Applying Structural Equation Modeling to Analyze the Mutual Causality between Corruption and Trust and the Impact of Lava Jato: Evidence from Brazil and Mexico
Abstract
Based on data from the 2012 and 2016 America Barometer studies, this study explores the relationship linking corruption experience and trust in local government in Brazil and selected countries, and accesses the effect of the anti-corruption investigation, called Lava Jato operation, on those variables. It is employed a simultaneous equation model using instrumental variables and accounting for missing values. The findings suggest no mutual causality between citizens’ experience with corruption and their trust in the local government. However, corruption perception has a significant negative impact on trust in local government for Brazil and countries not involved in Lava Jato. Moreover, results show that respondents with leftist political ideology tend to have less trust in local government, and citizens’ experience with corruption and their trust in the local government do not appear to have been significantly impacted by Lava Jato. At the time this study was conducted, there were no systematic studies on the effect of the Lava Jato operation on indicators such as corruption experience and trust in local government.