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A Theory of the Corrupt Keynesian

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  • Aidt, T.S.
  • Dutta, J.

Abstract

We evaluate the impact of real business cycle shocks on corruption and economic policy in a model of entry regulation in a representative democracy. We .nd that corruption is procyclical and regulation policy is counter-cyclical. Corrupt politicians engage in excessive stabilization of aggregate fluctuations and behave as if they were Keynesian. We also find that business cycle shocks can induce political instability with politicians losing office in recessions.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0861.pdf
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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0861.

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Date of creation: Dec 2008
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Handle: RePEc:cam:camdae:0861

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Web page: http://www.econ.cam.ac.uk/index.htm

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Keywords: Corruption; entry regulation; performance voting; business cycles.;

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  1. Toke Aidt & Jayasri Dutta & Vania Sena, 2006. "Governance Regimes, Corruption and Growth: Theory and Evidence," Discussion Papers 15_2006, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
  2. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implicationsfor Growth," University of Chicago - George G. Stigler Center for Study of Economy and State 65, Chicago - Center for Study of Economy and State.
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  7. Toke S. Aidt & Jayasri Dutta, 2008. "Policy Compromises: Corruption And Regulation In A Democracy," Economics and Politics, Wiley Blackwell, vol. 20(3), pages 335-360, November.
  8. Gunjan Sharma, 2006. "Competing or Collaborating Siblings? Industrial and Trade Policies in India," Working Papers 0610, Department of Economics, University of Missouri.
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  12. Persson, Torsten & Roland, Gerard & Tabellini, Guido, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1163-1202, November.
  13. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  14. Toke S. Aidt, 2003. "Economic analysis of corruption: a survey," Economic Journal, Royal Economic Society, vol. 113(491), pages F632-F652, November.
  15. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
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