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

  • Serena Brianzoni

    (Universita' Politecnica delle Marche)

  • Raffaella Coppier

    (Universita' di Macerata)

  • Elisabetta Michetti

    (Universita' di Macerata)

Registered author(s):

    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.

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    File URL: http://www2.unimc.it/ricerca/dipartimenti/dipartimento-di-istituzioni-economiche-e/wpaper/wpaper00068/filePaper
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    Paper provided by Macerata University, Department of Finance and Economic Sciences in its series Working Papers with number 68-2012.

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    Length: 21
    Date of creation: Nov 2012
    Date of revision: Sep 2015
    Handle: RePEc:mcr:wpdief:wpaper00068
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    1. 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.
    2. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan.
    3. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
    4. repec:cup:cbooks:9780521632935 is not listed on IDEAS
    5. Rose-Ackerman, Susan, 1975. "The economics of corruption," Journal of Public Economics, Elsevier, vol. 4(2), pages 187-203, February.
    6. 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.
    7. 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.
    8. Auriol, E., 1998. "Corruption in Procurement and Public Purchase," G.R.E.Q.A.M. 98a29, Universite Aix-Marseille III.
    9. Barro, R.J., 1988. "Government Spending In A Simple Model Of Endogenous Growth," RCER Working Papers 130, University of Rochester - Center for Economic Research (RCER).
    10. Marco Celentani & Juan J. Ganuza, 2000. "Corruption and competition in procurement," Economics Working Papers 464, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2001.
    11. Medio,Alfredo & Lines,Marji, 2001. "Nonlinear Dynamics," Cambridge Books, Cambridge University Press, number 9780521558747, September.
    12. Paolo Mauro, 2004. "The Persistence of Corruption and Slow Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 51(1), pages 1.
    13. Medio,Alfredo & Lines,Marji, 2001. "Nonlinear Dynamics," Cambridge Books, Cambridge University Press, number 9780521551861, September.
    14. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    15. repec:cup:cbooks:9780521659123 is not listed on IDEAS
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