Corruption vs production. A non-linear relationship

Corruption, Taxation and Economic Growth: Theory and Evidence

“…It differs in modeling corruption in two ways: bribes taken from public expenditure and bribes taken from public fiscal revenue in an endogenous growth model. Coppier (2005) considers that corruption affects the profits 1 Such an effect is line with the theory of beneficial corruption developed by Leff (1964), Nye (1967) suggesting that corruption might actually enhance efficiency when public regulation or bureaucracy is excessive. For a critique see Kurer (1993).…”

“…This last assumption is more plausible, and consistent with the literature on tax avoidance and corruption (Chen, 2003;Coppier, 2005). If e τ represents the actual tax rate which results from corruption, one can write: …”

“…g b can also be interpreted as a "public bad" resulting from the negative externality of public intervention. This modeling of corruption differs from that of authors like Coppier (2005), who posited that corruption affects the profits of the private enterprises and Barreto and Alm (2003), who considered it as an indirect rent taken by the public agent which creates a discretionary monopoly situation in the supply of public goods.…”

“…From the theoretical point of view, this paper is an extension of previous works by Barreto and Alm (2003) and Coppier (2005) who analyzed the interactions between corruption, taxation and growth. It differs in modeling corruption in two ways: bribes taken from public expenditure and bribes taken from public fiscal revenue in an endogenous growth model.…”

“…Coppier (2005) emphasized the importance of taking into account corruption in the explanation of the relation between taxation and growth, whereas Barreto and Alm (2003) focused more on the effects on welfare. In this study, we propose an alternative framework.…”