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Title: Corruption, fiscal policy, and growth: A unified approach
Authors: Ghosh, S
Neanidis, KC
Keywords: Corruption;Public expenditure;Public finances;Seigniorage;Income tax;Growth
Issue Date: 2011
Publisher: Brunel University
Citation: Economics and Finance Working Paper, 11-20, Nov 2011
Abstract: In this paper, we study the effects of bureaucratic corruption on fiscal policy and the subsequent impact on economic growth. Here corruption takes three forms: (i) it reduces the tax revenue raised from households, (ii) it inflates the volume of government spending, and (iii) it reduces the productivity of ‘effective’ government expenditure. The analysis distinguishes between the case where fiscal choices are determined exogenously to ensure a balanced budget and the case where the government optimally sets its policy instruments. Our policy experiments reveal the complexity of the channels through which corruption impacts upon growth, and the conditions under which the direction of the effect takes shape. The findings from our unified framework could rationalise the diverse (and sometimes, apparently conflicting) empirical evidence on the impact of corruption on economic growth offered in the literature.
Description: Copyright @ 2011 Brunel University
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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