THE ROLE OF MONITORING OF CORRUPTION IN A SIMPLE ENDOGENOUS GROWTH MODEL

This article analyzes the relationship between economic growth and the monitoring of corruption. In our theoretical model, we derive a nonlinear relationship between the level of monitoring and economic growth, as well as between corruption and economic growth. At low monitoring levels, the economy experiences widespread corruption and medium growth rates, whereas no corruption occurs at intermediate monitoring levels, but low growth rates are recorded. At high monitoring levels, no corruption takes place and high growth rates are observed. The model is estimated using a dynamic panel data approach for Italy. Empirical results support the theoretical model. (JEL C33, D73, K42)