In addition to the increased OCN , the FP reduces maximum corruption in the city it is built in (ie 90% to 20% with no other corruption-reducing buildings) and acts as a second palace for distance corruption only. It does not directly reduce rank corruption in nearby cities (but indirectly lowers it everywhere). Alexman's article gives more depth.
Corruption is handled different after the 1.15 patch. Also, as corruption stands now, Communism is the best government after building the FP and SPHQ. (you'll eventually have 2-5 corruption per city like that).
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