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Benefit sharing: An incentive mechanism for social control of government expenditure

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  • Bugarin, Mauricio
  • Vieira, Laercio
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    Abstract

    The present paper analyzes the incentives individual members of society face to contribute to a nation's efforts in controlling corruption. A Principal-Agent model is constructed, leading to the following results. First, although individual agents do have an interest in devoting a portion of their resources to the nation's control effort, the opportunity cost of the effort and a free rider problem blocks the spontaneous provision of individual support to corruption control. Second, to cope with those incentives, a new welfare improving mechanism is proposed, which aligns individual incentives with those of society at no extra cost to the government.

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    File URL: http://www.sciencedirect.com/science/article/B6W5X-4N4J33R-2/2/4e272ca0b28836f6816722c9ad35ee1e
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    Bibliographic Info

    Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

    Volume (Year): 48 (2008)
    Issue (Month): 4 (November)
    Pages: 673-690

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    Handle: RePEc:eee:quaeco:v:48:y:2008:i:4:p:673-690

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    Web page: http://www.elsevier.com/locate/inca/620167

    Related research

    Keywords: Public finance Social control Governmental control Contract theory Incentives;

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    1. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-41, January.
    2. Mohsin Habib & Leon Zurawicki, 2002. "Corruption and Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan, vol. 33(2), pages 291-307, June.
    3. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
    4. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
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