Munich Personal RePEc Archive The Economic Effect of Corruption in Italy: A Regional Panel Analysis Lisciandra, Maurizio and Millemaci, Emanuele University of Messina February 2015 Online at https://mpra.ub.uni-muenchen.de/62173/ MPRA Paper No. 62173, posted 15 Feb 2015 14:18 UTC The Economic Effect of Corruption in Italy: A Regional Panel Analysis Maurizio Lisciandra and Emanuele Millemaci* ABSTRACT This paper provides a within-country analysis of the impact of corruption on economic growth using a panel of Italian regions from 1968 to 2011 through a robust measure of corruption. This measure is averaged over 5-year periods to reduce short-run fluctuations and to reduce probable delayed effects, which are typical for latent phenomena such as corruption. The results show a significant negative impact of corruption on long-term growth in all specifications, both on average and for each Italian region. As a consequence, a zero-level of corruption is growth maximizing. This effect is non-linear such that the negative impact of corruption on growth becomes less intense as corruption increases. Keywords: corruption, economic growth, cross-regional analysis, dynamic panel data. JEL: D73; K4; O10; R11. * University of Messina. Department of Economics, Business, Environmental and Quantitative Methods (SEAM), Piazza Pugliatti 1, 98122 Messina, Italy. Email:
[email protected] (corresponding author),
[email protected]. We thank the seminar participants at the STOREP 2014 in Bergamo and WINIR 2014 in London for their comments. The usual disclaimer applies. 1. INTRODUCTION Corruption is a very latent phenomenon. Both the theoretical understanding and empirical evidence show that the effects of corruption can be multidimensional, persistent and uncertain.