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A Growth Model with Corruption in Public Procurement: Equilibria and Policy Implications

Author

Listed:
  • Serena Brianzoni

    (Universita' Politecnica delle Marche)

  • Raffaella Coppier

    (Universita' di Macerata)

  • Elisabetta Michetti

    (Universita' di Macerata)

Abstract

We study the relationship between corruption in public procurement and economic growth, within the Solow framework in discrete time, while assuming that the public good is an input in the productive process and that the State fixes a monitoring level on corruption depending on the tax revenues. The resulting model is a two-dimensional, continuous and piecewise smooth map describing the evolution of the capital per capita and that of the corruption level. We study model from the analytical point of view: we determine its fixed points, we study their local stability and, finally, we find conditions on parameters such that multiple equilibria co-exist. We also present numerical simulations useful to explain the role of parameters in the long{run path of the model and to analyze the structure of the basins of attraction when multiple equilibria emerge. Our study aims at demonstrating that stable equilibria with positive corruption may exist (according to empirical evidence), even though the State may reduce corruption by increasing the wage of the bureaucrat or by increasing the amount of tax revenues used to monitor corruption.

Suggested Citation

  • Serena Brianzoni & Raffaella Coppier & Elisabetta Michetti, 2012. "A Growth Model with Corruption in Public Procurement: Equilibria and Policy Implications," Working Papers 68-2012, Macerata University, Department of Finance and Economic Sciences, revised Sep 2015.
  • Handle: RePEc:mcr:wpdief:wpaper00068
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    References listed on IDEAS

    as
    1. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    2. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 503-530.
    3. Paolo Mauro, 2004. "The Persistence of Corruption and Slow Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 51(1), pages 1-1.
    4. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    5. Rose-Ackerman, Susan, 1975. "The economics of corruption," Journal of Public Economics, Elsevier, vol. 4(2), pages 187-203, February.
    6. Auriol, Emmanuelle, 2006. "Corruption in procurement and public purchase," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 867-885, September.
    7. Medio,Alfredo & Lines,Marji, 2001. "Nonlinear Dynamics," Cambridge Books, Cambridge University Press, number 9780521558747.
    8. Bose, Niloy & Capasso, Salvatore & Murshid, Antu Panini, 2008. "Threshold Effects of Corruption: Theory and Evidence," World Development, Elsevier, vol. 36(7), pages 1173-1191, July.
    9. Celentani, Marco & Ganuza, Juan-Jose, 2002. "Corruption and competition in procurement," European Economic Review, Elsevier, vol. 46(7), pages 1273-1303, July.
    10. 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.
    11. Medio,Alfredo & Lines,Marji, 2001. "Nonlinear Dynamics," Cambridge Books, Cambridge University Press, number 9780521551861.
    12. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
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