Do Business Booms Trigger Corruption?
Keywords:business cycles, embezzlement, permanent income, transitory income, rule of law
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.
Copyright (c) 2021 European Integration Studies
This work is licensed under a Creative Commons Attribution 4.0 International License.
This article is an Open Access article distributed under the terms and conditions of the Creative Commons Attribution 4.0 (CC BY 4.0) License (http://creativecommons.org/licenses/by/4.0/).