Do Business Booms Trigger Corruption?

Authors

  • Kouramoudou Kéïta Faculté des Sciences Economiques et de Gestion de l’Université de Kindia, Guinée Mission d’Appui à la Mobilisation des Ressources Internes (MAMRI), Primature, Conakry, Guinée
  • Hannu Laurila Faculty of Management and Business, Tampere University, Finland

DOI:

https://doi.org/10.5755/j01.eis.1.15.29160

Keywords:

business cycles, embezzlement, permanent income, transitory income, rule of law

Abstract

In the literature, the nexus between economic growth and corruption is well covered, but there are only few studies on cyclical variations of corruption. For example, Galbraith (1997) claims that embezzlement flourishes in business booms and withers in recessions, and Gokcekus and Suzuki (2011) support the claim by finding a positive correlation between transitory income and corruption. This paper retests the argument and produces conflicting results. It is found that corruption shrinks as transitory income increases meaning that economic booms foster integrity rather than corruption. Moreover, the negative correlation is strong in high-income countries and in those with sound rule of law which points to developed countries, whereas the effect remains relatively weak in countries with low income or poor rule of law which points to developing countries. The finding is relevant also from the perspective of the European Union.

Additional Files

Published

2021-09-16

Issue

Section

Managerial Aspects of European Integration