The Impact of Unemployment on Corruption: Exploring the Role of Labor Income Share in Economic Governance

This working paper examines the relationship between unemployment and corruption using cross-country data from 45 countries between 2005 and 2023. While previous research has explored institutional and economic determinants of corruption, the role of labor market conditions remains less clearly understood. The study investigates whether higher unemployment rates are associated with increased levels of perceived corruption and whether labor income share moderates this relationship. Using multiple linear regression models with controls for GDP per capita, income inequality, and government effectiveness, the analysis explores the structural link between labor market outcomes and governance quality. The results indicate that higher unemployment is significantly associated with higher levels of perceived corruption, while a higher labor income share is associated with lower corruption levels. These findings suggest that labor market dynamics and income distribution may influence incentives for rent-seeking behavior and institutional integrity. By integrating labor market indicators into the analysis of corruption, this paper contributes to the political economy literature on governance and economic inequality and highlights the importance of inclusive labor market structures for institutional stability.