The cost of corruption in the Italian solid waste industry

The article investigates the link between corruption and efficiency using a rich micro-level data set on solid waste collection activities in 529 Italian municipalities observed over the years 2004-2006. To test the impact of corruption on cost efficiency, we estimate a latent class stochastic frontier model accounting for technological heterogeneity across units. The results of our estimates show that corruption significantly increases inefficiency, a finding that is robust to the inclusion of alternative local corruption indicators and other control variables such as geographical, demographic, and political factors. Finally, we find that the impact of corruption tends to be greater in the southern regions of the country and in those municipalities that are less involved in recycling activities.