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Corruption, Exogenous Changes in Incentives and Deterrence

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  • Giuseppe Di Vita

Abstract

In this article we apply and extend the model elaborated by Acemoglu and Verdier in their seminal paper (2000), to examine how the economy represented in their theoretical framework responds to an exogenous change in the agent's incentive. In particular, we focus on the consequences of a famous sentence of the Italian Supreme Court in plenary session, no. 500 of 1999, in which a revolutionary interpretation of civil liability rules is introduced, allowing private agents of our economy to appear before the court to demand reimbursement for the damages suffered as a consequence of illicit behavior of the public administration. This is one of the few cases in which the judex substantially makes law in a system of civil law, and the modification in incentive whether or not to be corrupted comes from an authority that is not part of the game (the jurisdictional power). Basing our affirmations on the model, we can say that corruption may have declined in Italy since the year 2000, as a result of a change in the incentives for both private agents and bureaucrats.

Suggested Citation

  • Giuseppe Di Vita, 2006. "Corruption, Exogenous Changes in Incentives and Deterrence," Working Papers 2006.16, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2006.16
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    References listed on IDEAS

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    1. Lorenzo Pellegrini & Reyer Gerlagh, 2004. "Corruption's Effect on Growth and its Transmission Channels," Kyklos, Wiley Blackwell, vol. 57(3), pages 429-456, August.
    2. Axel Dreher & Thomas Herzfeld, 2005. "The Economic Costs of Corruption: A Survey and New Evidence," Public Economics 0506001, EconWPA.
    3. Ellickson, Bryan, 1973. "A Generalization of the Pure Theory of Public Goods," American Economic Review, American Economic Association, vol. 63(3), pages 417-432, June.
    4. Mo, Pak Hung, 2001. "Corruption and Economic Growth," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 66-79, March.
    5. Del Monte, Alfredo & Papagni, Erasmo, 2001. "Public expenditure, corruption, and economic growth: the case of Italy," European Journal of Political Economy, Elsevier, vol. 17(1), pages 1-16, March.
    6. Shouyong Shi & Ted Temzelides, 2004. "A Model Of Bureaucracy And Corruption," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(3), pages 873-908, August.
    7. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
    8. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-141, January.
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    Keywords

    Bureaucrats; Government failure; Incentives; Market failure; Public goods;

    JEL classification:

    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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