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Corruption, Government Expenditure and Public Debt in OECD Countries

Author

Listed:
  • Alfredo Monte

    (University of Naples Federico II)

  • Luca Pennacchio

    (Parthenope University of Naples)

Abstract

This paper contributes to the literature on the macroeconomic implications of corruption by investigating its impact on public debt. Using a panel of OECD countries over the period 1995–2015, we provide evidence that corruption increases public debt and that this effect is independent of the size of government expenditure. Our estimates suggest that if corruption was halved, public debt would decrease by 2% in the short term. Looking at countries characterized by high levels of both corruption and public debt, such as Greece and Italy, we find that the detrimental effect of corruption on public debt is also present in the long term. These findings have important implications for policy-makers, as they suggest that improved control of corruption is a possible instrument for curbing public debt in advanced economies.

Suggested Citation

  • Alfredo Monte & Luca Pennacchio, 2020. "Corruption, Government Expenditure and Public Debt in OECD Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 62(4), pages 739-771, December.
    • Handle: RePEc:pal:compes:v:62:y:2020:i:4:d:10.1057_s41294-020-00118-z
    DOI: 10.1057/s41294-020-00118-z
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    More about this item

    Keywords

    Corruption; Public debt; Government expenditure; Developed countries;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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