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Do "Clean Hands" Ensure Healthy Growth? Theory and Practice in the Battle Against Corruption

Author

Listed:
  • Coppier, Raffaella

    (Department of Economic and Financial Institutions, University of Macerata, Macerata (MC), Italy)

  • Costantini, Mauro

    (Department of Economics, University of Vienna, Vienna, Austria)

  • Piga, Gustavo

    (Department of Economics and Institutions, University of Rome Tor Vergata, Roma, Italy)

Abstract

This paper analyzes the existing relationship between economic growth and the monitoring of corruption and examines the possible outcome of the implementation of a State reform in order to weed out corruption. Growth is always higher when monitoring is high and therefore corruption eradicated. But growth declines when monitoring against corruption is not too high, say intermediate, so much that it makes an equilibrium with corruption and little monitoring a more growth-enhancing solution. It is also stressed that when reforms to combat corruption appear to be implausible, they tend to curb most productive investments. The model is estimated using a dynamic panel data approach for Italy. Italy has been plagued by corruption and in the late 80s and early 90s several scandals erupted which led to the well-known "Clean Hands" (Mani pulite) inquiries. Empirical results support the theoretical model.

Suggested Citation

  • Coppier, Raffaella & Costantini, Mauro & Piga, Gustavo, 2009. "Do "Clean Hands" Ensure Healthy Growth? Theory and Practice in the Battle Against Corruption," Economics Series 238, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsesp:238
    as

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    File URL: http://www.ihs.ac.at/publications/eco/es-238.pdf
    File Function: First version, 2009
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Gustavo Piga, 2011. "A Fighting Chance Against Corruption in Public Procurement?," Chapters,in: International Handbook on the Economics of Corruption, Volume Two, chapter 5 Edward Elgar Publishing.
    2. Meixing Dai & Moïse Sidiropoulos & Eleftherios Spyromitros, 2015. "Fiscal Policy, Institutional Quality and Central Bank Transparency," Manchester School, University of Manchester, vol. 83(5), pages 523-545, September.
    3. Joseph G. ATTILA, 2008. "Corruption, taxation and economic growth: theory and evidence," Working Papers 200829, CERDI.
    4. Coppier, Raffaella & Michetti, Elisabetta, 2006. "Corruption vs production. A non-linear relationship," Economic Modelling, Elsevier, vol. 23(4), pages 622-637, July.

    More about this item

    Keywords

    Corruption; growth; reform; panel data;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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