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Do economic and political crises lead to corruption? The role of institutions

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  • Saha, Shrabani
  • Sen, Kunal

Abstract

A large body of literature exists on the role of institutions in combating corruption and its influence on economic development. However, there is a paucity of literature on the inter-relationships between economic and political crises, institutions, and corruption. This paper addresses the question: how does institutional quality matter in affecting corruption during political and economic crises? To answer this question, we use a recently released historical panel dataset called V-Dem for over 130 countries during 1800–2020. The results suggest some heterogenous effects depending on the type of crisis and how we measure it. For example, strong institutions can control corruption in cases of political and civil violence and economic slowdown, but the effect disappears in other crises such as democracy breakdowns, coups, armed-conflict and civil-war and currency, inflation, and debt crisis. Furthermore, strong institutions in advanced economies prevent corruption in a significant way during political and civil violence.

Suggested Citation

  • Saha, Shrabani & Sen, Kunal, 2023. "Do economic and political crises lead to corruption? The role of institutions," Economic Modelling, Elsevier, vol. 124(C).
    • Handle: RePEc:eee:ecmode:v:124:y:2023:i:c:s0264999323001190
    DOI: 10.1016/j.econmod.2023.106307
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    More about this item

    Keywords

    Corruption; Institutions; Economic crises; Political crises; Panel data; The rule of law;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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