Corruption and production: a policy analysis

Raffaella Coppier and Elisabetta Michetti
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Raffaella Coppier: University of Macerata
Elisabetta Michetti: University of Macerata

No 22-2004, Working Papers from Macerata University, Department of Finance and Economic Sciences

Abstract:

This paper analyzes the relation existing between corruption, monitoring and output in an economy. By solving a dynamic game we prove that equilibrium output is a non-linear upper-hemicontinuous function (MP function) of the monitoring level implemented by the State on corruption, presenting 3 different equilibrium scenarios. According to our model, we analyze the optimal strategy depending on the policy objective of the State and we prove that if the State is budget constrained the optimal policy can lead the economy to an equilibrium with widespread corruption and maximum production.

Keywords: Policy analysis; Equilibrium production; Corruption; Dynamic game (search for similar items in EconPapers)
Date: 2004-10, Revised 2008-10
New Economics Papers: this item is included in nep-pol
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Published in Economic Modelling, Vol. 23, N. 4 pp 622-637

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