Transit Stud Rev (2010) 16:908–917

DOI 10.1007/s11300-009-0118-6

SOCIETY, POLICY, INSTITUTIONS AND GOVERNANCE

Corruption, Social Welfare, Culture and Religion

in European Union 27

Mihai Ioan Mutascu

Received: 30 January 2009 / Accepted: 30 July 2009 / Published online: 18 December 2009

Springer-Verlag 2009

Abstract Corruption is a complex and generalized phenomenon all over the

world, with economical, cultural, social, psychological, political, administrative and
religious dimensions. Defining and studying the phenomenon go through the most
different thinking filters known in the specialist literature: economic, social-cultural,
political, administrative and religious. The aim of this article is to quantify and
analyze, in European Union 27 (EU27), the relationship between corruption and
economic, cultural and religious determinant factors, through a regressive ‘‘pool
data’’ model, for the period 1996–2008. The conclusion is that, in the EU27 case,
social welfare, power distance, individualism, masculinity, uncertainty avoidance
and religious influence significantly influence corruption. Moreover, religion
attenuates uncertainty avoidance, more exactly situations such as uncertainty, the
unknown, ambiguity or unexpected circumstances.

Keywords Corruption
Factors
Culture
Religion
Analysis

JEL Classification A13
D73
I30
Z12

Introduction

Corruption is a complex and generalized phenomenon all over the world, with
economical, cultural, social, psychological, political, administrative and religious
dimensions. By consequence, defining and studying the phenomenon go through the
most different thinking filters known in the specialist literature: economic, social-
cultural, political, administrative and religious.

M. I. Mutascu (&)
Faculty of Economics and Business Administration, West University of Timisoara,
Timisoara, Romania
e-mail: mihai.mutascu@gmail.com; mihai.mutascu@feaa.uvt.ro

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In the economical view, Shleifer and Vishny (1993) see corruption as a problem
related to the monopolistic market structure, not a competitive one, and recommend
that policies should focus more closely on the phenomenon of corruption and not on
the public sector itself. In a particular way, Al-Marhubi (2000) finds a significant
relationship between inflation and corruption, which suggests that a high rate of
inflation came with high corruption. For Wang and Rosenau (2001), corruption is
the secret collaboration between public officials and private actors for private
financial gains in contravention of public interest.
Drehel and Schneider (2006) connect the shadow economy with corruption, as an
inverse or direct relationship, depending on the degree of the state development.
Based on a model of general trade policy and fiscal economic equilibrium, Carraro
et al. (2006) shows that corruption affects economic growth with different
intensities from one period to another (many studies refute this results). Moreover,
connecting with economic growth, a couple of authors identify and analyze the
inverse relationship between corruption and the level of social welfare. From this
group we regard Svensson (2005).
In the social-cultural sense, Nye (1967) considers corruption as a deviation from
the formal duties of a public role, in individual compartmental approach: personal,
close family and private clique. The definition summarizes a group of elements,
such as bribery, theft, nepotism and misappropriation. Hungtington (1968) identifies
different degrees of corruption, from one culture to another, with higher intensity in
the modernization periods, corruption being a social pathology, according to
Carvajal (1999).
Husted (1999) describes a cultural profile of a corrupt country as one in which
there is high uncertainty avoidance, high masculinity, and high power distance
(without individualism, which is highly correlated with GNP per capita). Getz and
Volkema (2001) revealed that uncertainty avoidance moderated the relationship
between economic adversity and corruption, whereas power distance and uncer-
tainty avoidance were positively associated with corruption.
Nichols et al. (2004), based on a study that includes two states on different
continents, argues that the corruption perception seeks the recent history of a
population, determined by foreign domination, democratic change and transition
periods. Barr and Serra (2006) see the corruption as a phenomenon set of
preferences and rules, following the slogan ‘‘not engaging in bribery because it is
harmful to society’’. They conclude, concise, that the corruption is, in part, a cultural
phenomenon.
In the political-administrative approach, Hungtington (1968) reveals that the
phenomenon of corruption is an effective absence of the political institutions and
Rose-Ackerman (1978) shows that the decentralization of government decision-
making power increases the risk of corruption, because the review and detection
limits are confirmed. Tanzi (1998) accepts the definition of the World Bank, in
which corruption is the simplest kind of public power abuse for private benefits,
gifts, mainly related to the state monopoly and the way the government perceives
the power. Simply, in a similar way, Rajib and Subarna (2000) develop a general
definition of corruption, as an abuse of public power for private benefit. Referring to

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the quality of bureaucratic apparatus, Drehel and Schneider (2006) show that the
better quality of the public institutions reduces corruption.
In the religious perspective, a previous research has found that religion influences
the tendency of the corruption phenomena. According to Devettere (2002), the high
attention to virtue ethics is the most effective way to combat corruption. Moreover,
religions, such as Christianity, may limit the effects of this global problem.
Particularly, Paldham (2001) founds that the percentage of Protestants was
negatively related to corruption, after controlling for known economic predictors
(real gross domestic product per capita). Several years later, Jude (2004) considers
that the percentage of Protestants within a nation will be negatively related to the
level of corruption within a national economy.

Theoretical Fundaments

This scientific approach is intended to analyze the relationship between corruption

and its determinant factors of an economic, cultural and religious nature. According
to the above-mentioned premise, all the theoretical presented elements allow us to
formulate a series of theoretical working assumptions, which consider three of the
approaching coordinates of corruption: one economical, one cultural (Hofstede’s
cultural dimensions) and a religious one.
The hypotheses are:
H1 The level of corruption is growing as social welfare is decreasing.
H2 The level of corruption is growing as power distance, masculinity and
uncertainty avoidance are augmenting and individualism is decreasing.
H3 The level of corruption is growing as the percentage of Christians and/or
Protestants within a nation is decreasing.
In summary, the meanings of the hypothesis work relations are reported in
Table 3 of Appendix.
The fundamental assumption is that the corruption is a complex phenomenon
determined by a couple of factors, such as: social welfare, cultural determinants
(power distance, individualism, masculinity and uncertainty avoidance) and
religion. The linkages are in the same sense for the case of power distance,
masculinity and uncertainty avoidance and contrary for the case of social
welfare, individualism and percentage of Christians and/or Protestants within a
nation.

Methods and Results

To quantify and analyze the relationship between corruption (dependent variable)

and economic, cultural and religious determinant factors (independent variables),
the period 1996–2008 and a sample of 27 member states of the European Union
were considered.

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Corruption is quantified by the ‘‘Freedom from corruption’’ index—FC (the

component of the Index of Economic Freedom), developed by The Heritage
Foundation, on a scale from 0 to 100, where 0 indicates a very high level of
corruption and 100 an extremely small one.
The ‘‘social welfare’’ factor is quantified by the United Nations Development
Program—The Human Development Index (HDI); Hofstede’s cultural determinant
by Hofstede (2003)—Power Distance Index (P), Individualism Index (I), Mascu-
linity Index (M) and Uncertainty Avoidance Index (U); and the ‘‘religion’’ (R) is
estimated by an Index of Religion.
1. The ‘‘Human Development Index’’ measures the degree of human development
by combining life expectancy, education levels and realized income, on a scale
from 0 to 1, where 0 denotes a minimum level of welfare and 1 a maximum one.
2. ‘‘Power Distance Index’’ is defined as the extent to which the less powerful
members of institutions and organizations within a society expect and accept
that power is distributed unequally. The index normally has a range of about
100 points between very small Power Distance and very large Power Distance
countries.
3. ‘‘Individualism Index’’ is the opposite of collectivism. Individualism stands for
a society in which the ties between individuals are loosened: a person is
expected to look after himself or herself and his or her immediate family only.
Collectivism stands for a society in which people from birth onwards are
integrated into strong, cohesive in-groups, which continue to protect them
throughout their lifetime in exchange for unquestioning loyalty. The index
normally has a range of about 100 points between strongly collectivist and
strongly individualist countries.
4. ‘‘Masculinity Index’’ is the opposite of femininity. Masculinity stands for a
society in which social gender roles are clearly distinct: men are supposed to be
assertive, tough, and focused on material success; women are supposed to be
more modest, tender, and concerned with the quality of life. Femininity stands
for a society in which social gender roles overlap: both men and women are
supposed to be modest, tender, and concerned with the quality of life. The index
normally has a range of about 100 points between strongly feminine and
strongly masculine countries.
5. ‘‘Uncertainty Avoidance Index’’ is defined as the extent to which the members
of institutions and organizations within a society feel threatened by uncertain,
unknown, ambiguous, or unstructured situations. The index normally has a
range of about 100 points between weak Uncertainty Avoidance and strong
Uncertainty Avoidance countries.
6. ‘‘Index of Religion’’ is estimated by a sets of three dummy variables, where 1,
Orthodox Christianity; 2, Protestant Christianity; and 3, Catholic Christianity
(Appendix, Table 4).
Based on the illustrated variables, the sense of changes existing between
corruption and its determinant factors, in according with theoretical assumptions
made above, are reported in Table 5 of Appendix.

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The method of analysis used is the econometrical modeling, elaborating a ‘‘Pool

Date’’ regressive model, has this shape:
Yit ¼ a þ bxXit þ eit ð1Þ
where Yit represents the dependent variable—FC, a free term coefficient, b inde-
pendent variables coefficients, Xit independent variable—HDI, P, I, M, U and R, eit
error terms, i cross-sectional units observed for dated periods—27 sections (the
number of EU member states) and t the period of time (1996–2008).
FCit ¼ a þ b1 xHDIit þ b2 xPit þ b3 xIit þ b4 xMit þ b5 xUit þ b6 xRit þ eit ð2Þ
The econometric analysis has two steps:
1. The econometric tests of the ‘‘pool data’’ model.
2. The ‘‘unit root test’’ of the residuals.
1. The econometric tests of the ‘‘pool data’’ model are illustrated in the Table 1.
The data shows the following:

Table 1 The econometric tests of the ‘‘pool data’’ model FC—HDI, P, I, M, U and R

Dependent variable: FC?

Method: pooled EGLS (Period SUR)
Date: 01/28/09 Time: 02:06
Sample: 1996 2008
Included observations: 13
Cross-sections included: 27
Total pool (balanced) observations: 351
Linear estimation after one-step weighting matrix

Coefficient Std. error t-Statistic Prob.

Variable
HDI? 13.28492 2.847770 4.665027 0.0000
P? -0.355062 0.094713 -3.748837 0.0002
I? 0.897312 0.084104 10.66901 0.0000
M? -0.262467 0.078963 -3.323943 0.0010
U? 0.262171 0.075861 3.455923 0.0006
R? 5.195227 2.477738 2.096762 0.0367
Weighted Statistics
R-squared 0.652799 Mean dependent var 1.781060
Adjusted R-squared 0.647767 SD dependent var 1.673854
SE of regression 0.993419 Sum squared resid 340.4743
F-statistic 129.7320 Durbin–Watson stat 1.951580
Prob. (F-statistic) 0.000000
Unweighted Statistics
R-squared 0.377218 Mean dependent var 61.96695
Sum squared resid 100234.5 Durbin–Watson stat 0.271179

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• the modulus values of the standard errors corresponding to the coefficients

of the function are lower than the values of the coefficients, which sustains
the correct estimation of these coefficients (a conclusion reinforced by the
low values of the probabilities);
• the value of the correlation coefficient (65.27%), shows a significant
statistical correlation between the dependent variable—FC and the
independent variables—HDI, P, I, M, U and R (the changes in the FC are
reflected considerably in the changes of HDI, P, I, M, U and R);
• the value of the F-statistic is bigger then the F-critical value (the probability
is almost 0), showing that the model is relevant;
• the Durbin–Watson test (approx. 2) shows that the residual variables are not
autocorrelated.
2. The ‘‘unit root test’’ of the residuals is presented in the Table 2. For verifying
the stationarity of the residuals are used the ‘‘unit root tests’’ proposed by Levin,
Lin and Chu; Im, Pesaran and Shin W-stat; ADF Fisher Chi-square and PP
Fisher Chi-square.

Table 2 The ‘‘unit root test’’ of the residuals

Group unit root test: Summary

Series: RESIDBELGIUM, RESIDFRANCE, RESIDGERMANY, RESIDITALY,
RESIDLUXEMBOURG, RESIDNETHERLANDS, RESIDDENMARK,
RESIDIRELAND, RESIDUK, RESIDGREECE, RESIDPORTUGAL,
RESIDSPAIN, RESIDAUSTRIA, RESIDFINLAND, RESIDSWEDEN,
RESIDCYPRUS, RESIDESTONIA, RESIDLATVIA, RESIDLITHUANIA,
RESIDMALTA, RESIDPOLAND, RESIDCZECHR, RESIDSLOVAKIA,
RESIDSLOVENIA, RESIDHUNGARY, RESIDROMANIA,
RESIDBULGARIA
Date: 01/28/09 Time: 02:20
Sample: 1996 2008
Exogenous variables: Individual effects
User specified lags at: 1
Newey–West bandwidth selection using Bartlett kernel
Balanced observations for each test

Method Statistic Prob.a Cross-sections Obs

Null: Unit root (assumes common unit root process)

Levin, Lin and Chu t* -7.41225 0.0000 27 297
Null: Unit root (assumes individual unit root process)
Im, Pesaran and Shin W-stat -2.80078 0.0025 27 297
ADF, Fisher Chi-square 94.3407 0.0006 27 297
PP, Fisher Chi-square 111.276 0.0000 27 297
a
Probabilities for Fisher tests are computed using an asymptotic Chi-square distribution. All other tests
assume asymptotic normality

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All tests—Levin, Lin and Chu; Im, Pesaran and Shin W-stat; ADF Fisher Chi-
square and PP Fisher Chi-square—indicate that the null hypothesis of unit root
is rejected, meaning that the residuals of ‘‘pool data’’ model is stationary.
In conclusion, the model may be considered as stable and representative to
describe, at EU level, the connection between FC and HDI, P, I, M, U and R.

Conclusions

By replacing the coefficients, the model becomes:

FC ¼ 13:2xHDI  0:35xP þ 0:89xI  0:26xM þ 0:26xU þ 5:19xR ð3Þ
The elaborated model does not confirm all proposed theoretical hypotheses (the
theoretical ‘‘sign’’ of uncertainty avoidance is not confirmed), rejecting the idea that
the increase of corruption (by minimizing the FC index) is the result of the damage
of social welfare (by minimizing HDI index), the increase of power distance,
masculinity and uncertainty avoidance (by maximizing P, M and U indexes) and the
degrease of individualism (by minimizing I index), and, finally, the percentage of
Christians and/or Protestants within a nation (by minimizing R index).
In fact, the model shows, very significantly, that corruption is high if social
welfare, individualism, uncertainty avoidance and percentage of Christians and/or
Protestants within a nation are reduced; and power distance and masculinity are
increased. On the contrary, corruption is low, if social welfare, individualism,
uncertainty avoidance and percentage of Christians and/or Protestants within a
nation are increased; and power distance and masculinity are reduced.
From all of the factors considered, the most important is social welfare, followed
by religion, individualism, power distance, masculinity and uncertainty avoidance.
Moreover, we can see that the degree of corruption can be controlled only if the
increase of social welfare and percentage of Christians and/or Protestants within a
nation exceeds the level of cultural determinants.
All statements above are valid in the statistical sample considered. Corruption
depends on economic, cultural and religious factors. In the EU27 case, it is
interesting to observe that the low level of uncertainty avoidance does not determine
a reduced level of corruption. In other words, a high level generates low corruption.
This can be explained by the fact that uncertainty avoidance is ‘‘diluted’’ by
religious belief. Religion, in this case, appears to be a good support for situations
such as: uncertainty, the unknown, ambiguity or unexpected circumstances.
In terms of European corruption, we can identify two categories of states:
(1) ‘‘The impure European state’’ is a state where the level of social welfare is low
and people from birth onwards are integrated into strong cohesive in-groups,
which continue to protect them throughout their lifetime in exchange for
unquestioning loyalty.
Characteristic for these states is that uncertainty avoidance is not attenuated by
religious beliefs or/and the number of Christians or/and Protestants is low.

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Moreover, the less powerful members within a society expect and accept that power
is distributed unequally. In ‘‘The impure European state’’ men are supposed to be
assertive, tough, and focused on material success, while women are supposed to be
more modest, tender, and concerned with the quality of life.
(2) ‘‘The Ideal European state’’ is a state where the level of social welfare is high
and the ties between individuals are loosened (a person is expected to look
after himself or herself and his or her immediate family only). In these states
uncertainty avoidance is strongly attenuated by religious beliefs and the
number of Christians or/and Protestants is very high.
Moreover, the less powerful members within a society expect and accept that
power is distributed equally. In this states, social gender roles overlap: both men
and women are supposed to be modest, tender, and concerned with the quality of
life.
In conclusion, the corruption depends on economic, cultural and religious
factors. In EU27 case, the social welfare, power distance, individualism,
masculinity, uncertainty avoidance and religion influence corruption significantly.
Moreover, religion attenuates and compensates uncertainty avoidance, especially
situations such as: uncertainty, the unknown, ambiguity or unexpected
circumstances.

Appendix

See Tables 3, 4, 5

Table 3 The sense (‘‘the sings’’) of the hypothesis work relations

The trend of The determinant factors The trend of determinant
corruption level of corruption factors of corruption

? 1. Social welfare -
? 2. Power distance ?
? 3. Individualism -
? 4. Masculinity ?
? 5. Uncertainty avoidance ?
? 6. The percentage of Christians -
and/or Protestants within a nation
- 1. Social welfare ?
- 2. Power distance -
- 3. Individualism ?
- 4. Masculinity -
- 5. Uncertainty avoidance -
- 6. The percentage of Christians and/or ?
Protestants within a nation

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916 M. I. Mutascu

Table 4 Index of religion in EU27 (dummy variables)

No. State Index of religion Prevailing religion

1 Belgium 3 Catholic Christianity

2 France 3 Catholic Christianity
3 Germany 2.5 Protestant and Catholic Christianity
4 Italy 3 Catholic Christianity
5 Luxembourg 3 Catholic Christianity
6 Netherlands 2.5 Protestant and Catholic Christianity
7 Denmark 2 Protestant Christianity
8 Ireland 2 Protestant Christianity
9 UK 2 Protestant Christianity
10 Greece 1 Orthodox Christianity
11 Portugal 3 Catholic Christianity
12 Spain 3 Catholic Christianity
13 Austria 3 Catholic Christianity
14 Finland 2 Protestant Christianity
15 Sweden 2 Protestant Christianity
16 Cyprus 1 Orthodox Christianity
17 Estonia 2.5 Protestant and Catholic Christianity
18 Latvia 2 Protestant Christianity
19 Lithuania 3 Catholic Christianity
20 Malta 2 Protestant Christianity
21 Poland 3 Catholic Christianity
22 Czech Republic 3 Catholic Christianity
23 Slovakia 3 Catholic Christianity
24 Slovenia 3 Catholic Christianity
25 Hungary 3 Catholic Christianity
26 Romania 1 Orthodox Christianity
27 Bulgaria 1 Orthodox Christianity

Table 5 The sense (‘‘the sings’’) of the relations between FC—HDI, P, I, M, U and R, according to
working hypothesis
The trend of FC The determinant index of FC The index
determinant trend

- 1. Social welfare -
- 2. Power distance ?
- 3. Individualism -
- 4. Masculinity ?
- 5. Uncertainty avoidance ?
- 6. The percentage of Christians and/or -
Protestants within a nation
? 1. Social welfare ?

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Table 5 continued

The trend of FC The determinant index of FC The index

determinant trend

? 2. Power distance -
? 3. Individualism ?
? 4. Masculinity -
? 5. Uncertainty avoidance -
? 6. The percentage of Christians and/or ?
Protestants within a nation

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