Title: The historical economics of corruption and development within Italy
Authors: Ilaria Petrarca; Roberto Ricciuti
Department of Economics, University of Verona, Vicolo Campofiore 2, 37129 Verona, Italy
University of Verona and CESifo, Vicolo Campofiore 2, 37129 Verona, Italy
Abstract: We investigate the relationship between corruption and economic performance, focusing on the historical roots of the former. We claim that a sequential mechanism linking history to development exists: first, history defines the quality of social capital; then, social capital determines the level of corruption; finally, corruption affects economic performance. We empirically test this hypothesis on a dataset of Italian provinces, and address the possible endogeneity of corruption by applying an IV model. We use three sets of historical instruments for corruption: 1) foreign dominations that ruled Italian regions between the 16th and 17th century; 2) autocracy/autonomous rule in the 14th century; 3) an index of social capital between the end of the 19th and at the onset of the 20th century. The results confirm the validity of the set of instruments (2) and (3), and indicate a significant impact of historically driven corruption on development.
Keywords: corruption; economic development; institutions; social capital; history; historical economics; Italy.
Int. J. of Monetary Economics and Finance, 2013 Vol.6, No.2/3, pp.186 - 202
Available online: 13 Sep 2013