Corruption and Political Accountability under Economic Shocks: Preliminary Findings

While the existing literature extensively explores the adverse effects of corruption on economic performance, there is limited research on how economic shocks influence corruption and political accountability. To address this gap, we develop a theoretical political model that allows politicians to be corrupt and citizens to punish corruption.
In the model, positive economic shocks lead to increased corruption and weakened accountability. We validate these predictions empirically in a series of laboratory experiments conducted with university students in Colombia. Our findings indicate that corruption rates rise significantly during economic booms. Citizens willingness to punish corrupt politicians remains relatively unchanged across the business cycle. Citizens decide when to punish based on the observed allocation of public goods. Regardless of the state of the economy, low allocations lead to significantly higher punishment than higher allocations, which may lead to the punishment of honest politicians during economic downturns. Additionally, we evaluate the role of expectations in shaping decisions: during positive economic shocks, politicians anticipate reduced punishment, while citizens mistakenly expect a decrease in corruption. These results underscore the need for robust transparency and accountability mechanisms to safeguard governance standards.