The economic growth of a country is a complex variable, i.e. it depends on many factors. For example, the level of education of the population, fiscal and monetary policies, infrastructural investments, the exchange rate, expenditure on research and development, the tax burden, the size of the debt… and one could go on. We are convinced that the level of corruption could also be one of these factors.
Corruption and growth, where is the logical connection?
It is common sense to suggest that a high level of corruption can have a negative impact on the economic growth of a country, and therefore on the formation of income. There are several reasons behind this hypothetical causal link:
- corruption can lead to the formation of so-called "castes", thus preventing the population and the country from growing uniformly; favoring only small parts of the economy risks causing a reduction in total growth;
- corruption could worsen public accounts and fiscal performance, just think of the rigged tenders to win a contract and the increase in the size of the public administration;
- corruption can affect labor productivity as it does not reward efficiency but personal and patronage relationships;
- corruption reduces the share of investments.
With those assumptions in mind, let's ask the data what it has to say about it by relating these variables:
- an index that measures and quantifies the level of corruption in each country;
- the real economic growth (ie net of inflation) of each country.
Corruption in Italy
Corruption has never left the Bel Paese: comparing it to the major European states, Italy has long managed to do worse on the basis of all the indicators available to measure corruption [Sic]. In fact, in the world ranking of perceived corruption, Italy ranks 60th out of 176 countries. And the scenario gets worse if we consider only the advanced economies: in this case the peninsula is the country where the most corruption is perceived. The effect of corruption has undoubtedly contributed to the formation of public debt, leading Italy to be one of the advanced countries with the worst public debt/GDP ratio.
Source: AdviseOnly
