Towards a model of economic crisis, social trust & corruption

Abstract

In this paper, we uncover the relationships between social trust, corruption and economic crisis. Our study is a combination of both theory and quantitative analysis. Our theoretical foundation is a collection of numerous studies from many different academic fields, especially from political science, corruption study, sociology and economics. We then further strengthen our arguments with both descriptive analysis and regression analysis of secondary data. Our dataset is collected from “Quality of Government Institute” and “The Behavioral and Financial Stability Project”, and includes 11364 observations. Based on our quantitative findings, we discover that social trust is correlated with the duration of economic crises. Furthermore, we discover that equality, which plays an important role in the development of social trust, is correlated with GDP growth rate, inflation rate and public debt but not with unemployment rate. GDP growth rate, inflation rate, public debt and unemployment rate are four economic crisis indicators that were established based on our in-depth understandings of the theoretical foundation. Connecting our theoretical stance with our empirical evidence, we then propose several possible explanations for the findings and clarify theoretical as well as practical implications of the findings.