Growth and welfare effects of corruption penalties

Oscar Afonso, Ana Maria Bandeira and Pedro Lima

Economic Systems, 2022, vol. 46, issue 3

Abstract: This paper analyses the steady-state effect of business corruption penalties on economic growth, corruption and welfare. To that end, the baseline horizontal R&D growth model is extended to include corruption, which is generated in intermediate goods production. Taxation on corruption depresses profits in production but also wages, leading to labor being reallocated from production to R&D, and, therefore, to a higher economic growth rate. Moreover, it also reduces corruption and increases welfare if preferences towards a corruption-free environment are strong enough. The results are in line with the data observed for 15 EU countries.

Keywords: Horizontal growth model; Consumer’s welfare; Corruption (search for similar items in EconPapers)
JEL-codes: D73 E62 O31 O33 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0939362522000668
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:46:y:2022:i:3:s0939362522000668

DOI: 10.1016/j.ecosys.2022.101004

Access Statistics for this article

Economic Systems is currently edited by R. Frensch

More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Liu ().