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Corruption, taxation and economic growth: theory and evidence

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  • Joseph G. ATTILA

Abstract

In this paper, we analyze the interaction between corruption, taxation and economic growth. Our contributions are twofold. Theoretically, in an endogenous growth model, we introduce corruption in two different ways: corruption in the public expenditure and corruption in the public revenue. We show two opposing effects. Under certain conditions, corruption can affect growth rate positively but it can also exert a negative effect via fiscal revenue. Not only does it tend to make the tax rate, which maximizes the long run growth rate sub-optimal, but it can also create distortions that can lead to excessive tax rates harmful to growth. The empirical analyses are based on non parametric estimates as well as econometric investigations. Our results support the assumption of a non linear relationship between public resources and growth. Interactions between public resources and institutional variables evidence the following the results: (i) the more countries are corrupt the stronger the negative effects of taxation on the growth (ii) Once the negative effects of corruption are accounted

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  • Joseph G. ATTILA, 2008. "Corruption, taxation and economic growth: theory and evidence," Working Papers 200829, CERDI.
    • Handle: RePEc:cdi:wpaper:1060
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    5. Julia G. Dobreva, 2019. "Impediments To Economic Development Of Contemporary Economies," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 13(1), pages 8-15.
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    7. Yaru, Mohammed Aminu & Raji, Ajibola Simbiat, 2021. "Corruption, Governance and Tax Revenue Performance in Sub-Saharan Africa," African Journal of Economic Review, African Journal of Economic Review, vol. 10(1), December.
    8. Meričková Beáta Mikušová & Bašteková Andrea & Stejskal Jan & Pekár Bernard, 2017. "Economic, Political, Social Factor of Corruption in the Slovak Republic," NISPAcee Journal of Public Administration and Policy, Sciendo, vol. 10(1), pages 99-120, June.
    9. Idrys Fransmel Okombi, 2021. "Taxation et croissance économique en Afrique: la qualité des institutions importe‐t‐elle?," African Development Review, African Development Bank, vol. 33(4), pages 592-606, December.
    10. Dinh Thanh, Su & Hart, Neil & Canh, Nguyen Phuc, 2020. "Public spending, public governance and economic growth at the Vietnamese provincial level: A disaggregate analysis," Economic Systems, Elsevier, vol. 44(4).
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    12. Sule Akkoyunlu & Debora Ramella, 2017. "Corruption and Economic Development," Working Paper series 17-29, Rimini Centre for Economic Analysis.
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