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Do Business Cycles Trigger Corruption?

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  • Kouramoudou Keita
  • Hannu Laurila

    (School of Management, University of Tampere)

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.

Suggested Citation

  • Kouramoudou Keita & Hannu Laurila, 2016. "Do Business Cycles Trigger Corruption?," Working Papers 1602, Tampere University, Faculty of Management and Business, Economics.
    • Handle: RePEc:tam:wpaper:1602
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    File URL: http://urn.fi/URN:ISBN:978-952-03-0089-0
    File Function: First version, 2016
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    References listed on IDEAS

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    More about this item

    Keywords

    embezzlement; permanent income; transitory income;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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