The Economic Effect of Corruption in Italy: A Regional Panel Analysis

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.