Economic Uncertainty and Corruption: Evidence from a Large Cross-Country Data Set

Posted: 23 Sep 2014 Last revised: 19 Apr 2016

See all articles by Rajeev K. Goel

Rajeev K. Goel

Illinois State University - Department of Economics

Rati Ram

Illinois State University - Department of Economics

Date Written: 2013

Abstract

A vast amount of research has considered numerous causes and correlates of corruption. Also, there have been many studies of the consequences of various forms of uncertainty. However, exploration of the nexus between economic uncertainty and corruption appears scarce. After providing an intuitive and heuristic linkage between general economic uncertainty and corruption, this article uses a large cross-country data set to augment a fairly standard model with simple proxies for uncertainty and to investigate how economic uncertainty might affect the prevalence of corruption. In addition, a quantile-regression framework is used to judge how the strength of various covariates may differ with the level of corruption. Seven main points emerge from the estimates. First, economic uncertainty is associated positively with corruption, and the relation seems to be robust across measures of uncertainty and corruption. Second, quantile-regression estimates indicate considerable parametric heterogeneity across the distribution of corruption. Third, Gross Domestic Product (GDP) per capita has the expected corruption-mitigating role. Fourth, increased political rights and civil liberties also appear to lower corruption. Fifth, greater government consumption is associated with lower corruption. Sixth, while the hyperinflation dummy lacks significance in most OLS regressions, its significance varies across the distribution of corruption. Seventh, neither police force nor government subsidies shows significance, but transition economies have more corruption.

Keywords: corruption, uncertainty, government, quantile regression, transition economies

JEL Classification: H8, K4, P2

Suggested Citation

Goel, Rajeev K. and Ram, Rati, Economic Uncertainty and Corruption: Evidence from a Large Cross-Country Data Set (2013). Applied Economics, Vol 45 no. 24, pp.3462-3468, 2013. Available at SSRN: https://ssrn.com/abstract=2499713

Rajeev K. Goel (Contact Author)

Illinois State University - Department of Economics ( email )

Normal, IL 61790-4200
United States

Rati Ram

Illinois State University - Department of Economics ( email )

Normal, IL 61790-4200
United States
309-438-7101 (Phone)
309-438-5228 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
238
PlumX Metrics