Abstract

Corruption is widely believed to have an adverse effect on economic development. There is a large body of literature on the consequences of corruption and how institutions can control it. However, the role of political and economic crisis as an explanatory factor that has been relatively under-studied. Moreover, there is scant literature on the inter-relationships between economic and political crisis, institutions, and corruption. This paper addresses the question: how do political and economic crisis and institutional quality matter in affecting corruption? More specifically, if a higher level of rule of law allays the possible adverse effect that political and economic crisis may have on corruption. To answer this question, we use a recently released historical panel dataset called VDEM for over hundred countries over 1800-2020 years. 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 is not seen in other crisis such as democracy break downs, coups, armed conflict and civil war and currency, inflation, and debt crisis.