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Growth maximizing government size, social capital, and corruption
Author(s) -
Carmeci Gaetano,
Mauro Luciano,
Privileggi Fabio
Publication year - 2021
Publication title -
journal of public economic theory
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.809
H-Index - 32
eISSN - 1467-9779
pISSN - 1097-3923
DOI - 10.1111/jpet.12508
Subject(s) - economics , social capital , government (linguistics) , proxy (statistics) , language change , misappropriation , public economics , public capital , accountability , public fund , political science , law , public investment , art , philosophy , linguistics , literature , machine learning , computer science
Abstract Our paper intersects two topics in growth theory: the growth maximizing government size and the role of Social Capital in development. We modify a simple overlapping generations framework by introducing two key features: a production function à la Barro together with the possibility that public officials steal a fraction of public resources under their own control. As underlined by the literature on corruption, Social Capital affects public officials' accountability through many channels which also affect the probability of being caught for embezzlement and misappropriation of public resources. Therefore, in our endogenous growth model such probability is taken as a proxy of Social Capital. We find that maximum growth rates are compatible with Big Government size, measured both in terms of expenditures and public officials, when associated with high levels of Social Capital.