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A note on poor-institution traps in international fiscal policy games

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  • Pierre Faure

    ()
    (Larefi, Université Montesquieu - Bordeaux 4)

Abstract

This note explores the link between the effort level to strengthen institutional quality and the nature of the fiscal policy game among interdependent economies plagued by corruption. Every country has a lower incentive to improve public governance when the effort made abroad to remedy institutional deficiencies becomes weaker. More importantly, the model highlights a possible trade-off between fighting corruption in interrelated developing countries and promoting fiscal policy coordination among them: cooperation goes together with the acceptance of more corruption. It follows that poor-institution traps can be Pareto-improving.

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File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I1-P36.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 31 (2011)
Issue (Month): 1 ()
Pages: 375-387

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Handle: RePEc:ebl:ecbull:eb-11-00015

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Keywords: Corruption; Fiscal policy; International coordination;

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  1. Aidt, Toke & Dutta, Jayasri & Sena, Vania, 2008. "Governance regimes, corruption and growth: Theory and evidence," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 195-220, June.
  2. Hefeker, Carsten, 2008. "Taxation, Corruption and the Exchange Rate Regime," Proceedings of the German Development Economics Conference, Zurich 2008 17, Verein für Socialpolitik, Research Committee Development Economics.
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