A Panel Investigation on Corruption and Economic Growth: the Case of the Italian Regions

This paper provides an empirical analysis of the impact of corruption on economic growth using a panel of Italian regions from 1968 to 2005. The investigation shows a significant effect of corruption on regional economic growth when considering the entire time interval and appropriately controlling for various variables that influence growth. However, when controlling for the years in which clean hands operation has deployed its effects, the impact of corruption is not as robust. As demonstrated by similar studies in other countries, once variables and events are properly controlled, regional differences in the levels of corruption do not seem to explain the different growth rates. Cross-country empirical literature instead shows the opposite, probably suggesting that unobserved institutional differences among countries are responsible for the evidence of a negative effect of corruption on economic growth.