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Sugata Ghosh and Andros Gregoriou
''Can corruption favour growth via the composition of government spending?''
( 2010, Vol. 30 No.3 )
In an endogenous growth model with two public goods, we analytically derive the optimal composition of government spending in the presence of corruption. Although corruption results in a loss of productivity per se, an increase in corruption in the category of public spending that is harmed relatively more by corruption could have a favourable effect on growth, as it would encourage a benevolent government to divert spending towards the public good that is more productive, net of corruption.
Keywords: Corruption, optimal composition of government spending, endogenous growth.
JEL: E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
H5 - National Government Expenditures and Related Policies National Government Expenditures and Related Policies: General
Manuscript Received : Feb 01 2010 Manuscript Accepted : Aug 26 2010

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