Do economic and political crises lead to corruption? The role of institutions

A large body of literature exists on the role of institutions in combating corruption and its influence on economic development. However, there is a paucity of literature on the inter-relationships between economic and political crises, institutions, and corruption. This paper addresses the question: how does institutional quality matter in affecting corruption during political and economic crises? To answer this question, we use a recently released historical panel dataset called V-Dem for over 130 countries during 1800–2020. 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 disappears in other crises such as democracy breakdowns, coups, armed-conflict and civil-war and currency, inflation, and debt crisis. Furthermore, strong institutions in advanced economies prevent corruption in a significant way during political and civil violence.