Corruption vs Production. A non-linear relationship

This paper analyzes the relationship between corruption, monitoring and production that exists in an economy. We show that high levels of corruption can be connected to high levels of production and that increased monitoring of corruption over some range negatively affects production. In point of fact, we prove that equilibrium production is a non-linear function of the monitoring level, by presenting three different equilibria: high corruption with intermediate production, no corruption but low production and no corruption with high production. We also analyze an optimal strategy depending on the policy objective of the State.