This paper uses inter-country panel data obtained during the period 1990 to 2010 to examine how the occurrence of natural disasters has affected corruption within the public sector. There are a number of major findings from this study. (1) Natural disasters lead to corruption within the public sector. (2) Furthermore, disaggregating disasters into various categories for closer examination reveals that floods, which are foreseeable and affect victims that are limited to a particular group, increase corruption; however, other types of disasters do not have such a consequence. (3) The effect of floods is much greater in developed countries than in developing countries. These findings are observed even after considering the time trend, the various characteristics of the countries affected, and statistical outliers. In developed countries, people have an incentive to live within areas prone to flooding because the benefit expected from the occurrence of a flood is greater than its perceived cost.
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