Do Business Cycles Trigger Corruption?

Keita Kouramoudou and Hannu Laurila
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Hannu Laurila: School of Management, University of Tampere

No 1602, Working Papers from Tampere University, Faculty of Management and Business, Economics

Abstract: In the economic literature, the nexus between economic growth and corruption is well covered, but there are only few empirical studies on cyclical variation of corruption. Gokcekus & Suzuki (2011) in one such study. It finds that transitory income and corruption vary in parallel, thus confirming the famous claim of Galbraith (1997) that embezzlement flourishes in business booms and withers in recessions. This paper tests the general validity of the finding by using a more extensive dataset. The results are conflicting: corruption is found to shrink with the increase in transitory income and vice versa. In other words, economic booms foster integrity, and recessions make corruption bloom.

Keywords: embezzlement; permanent income; transitory income (search for similar items in EconPapers)
JEL-codes: D73 E32 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2016-03
New Economics Papers: this item is included in nep-hpe, nep-mac and nep-pol
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http://urn.fi/URN:ISBN:978-952-03-0089-0 First version, 2016 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:tam:wpaper:1602

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