A dynamic analysis of capital, corruption, and labor market interactions

Abstract

The complex relationship between corruption, economic growth, and labor dynamics has long been a challenge for policymakers. This study sheds new light on these dynamic interactions by constructing a novel economic model with saturation effects that integrate employment considerations. Unlike static or purely empirical models, our approach captures the system’s evolution over time, employing a logistic growth function to realistically reflect economic limitations and distinguishing between employed and unemployed labor segments. By incorporating a Holling type II function, the model captures the nonlinear influence of corruption on economic growth, acknowledging diminishing returns at higher corruption levels. Through advanced theoretical analysis, we establish the existence and stability conditions for three distinct long-term equilibria: stagnation, corruption-free growth with full employment, and a coexistent state where corruption persists alongside some economic activity. Our analysis goes beyond merely identifying these equilibria by revealing the specific conditions under which each state prevails, and we solidify these theoretical predictions with comprehensive numerical simulations depicting the system’s behavior under varying conditions. The findings underscore the importance of robust anti-corruption measures and a labor-intensive economic approach, highlighting that fostering growth outpacing resource depletion is crucial for escaping stagnation and achieving sustainable development. Overall, this research advances the field by integrating employment dynamics, a Holling type II function for corruption, and a focus on stability analysis, providing invaluable insights for policymakers aiming to promote sustainable economic development, combat corruption, and ensure healthy employment conditions.