Advanced Search
MyIDEAS: Login to save this paper or follow this series

Institutions and growth: A simplied theory of decentralization and corruption

Contents:

Author Info

Abstract

This paper aims at giving a theoretical background to the, some- times observed, puzzling inverse correlation between the degree of de- centralization and economic growth. We provide evidence that there is some interaction between decentralization and corruption in ex- plaining growth. Within an endogenous growth model, we analyze the problem of a benevolent central government trying to determine the optimal degree of fiscal decentralization. Specifically, it can pro- duce a public good directly, but inefficiently, or it can delegate some (or all) of the production to more efficient local bureaucrats. In the latter case, however, some resources will be wasted because of corrup- tion and the costs linked to monitoring expenditures. With respect to the benchmark case, then, the possibility of corruption yields both a distorted allocation of resources (insufficient decentralization) and an overall under provision of the public good.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ofce.sciences-po.fr/pdf/dtravail/WP2012-21.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2012-21.

as in new window
Length:
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:fce:doctra:1221

Contact details of provider:
Postal: 69, quai d'Orsay - 75007 PARIS
Phone: 01 44 18 54 00
Fax: 01 45 56 06 15
Email:
Web page: http://www.ofce.sciences-po.fr/
More information through EDIRC

Related research

Keywords: Fiscal federalism; corruption; Endogenous growth; Public Capital; Fiscal policy;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Tugrul Gurgur & Anwar Shah, 2014. "Localization and corruption: panacea or pandora's box?," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 109-136, May.
  2. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October.
  3. Christine Wong, 2011. "The Fiscal Stimulus Programme and Public Governance Issues in China," OECD Journal on Budgeting, OECD Publishing, vol. 11(3), pages 1-22.
  4. Seabright, Paul, 1996. "Accountability and decentralisation in government: An incomplete contracts model," European Economic Review, Elsevier, vol. 40(1), pages 61-89, January.
  5. Aurélie Cassette & Sonia Paty, 2010. "Fiscal decentralization and the size of government: a European country empirical analysis," Public Choice, Springer, vol. 143(1), pages 173-189, April.
  6. Mushfiq Swaleheen, 2011. "Economic growth with endogenous corruption: an empirical study," Public Choice, Springer, vol. 146(1), pages 23-41, January.
  7. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, . "The Quality of Government," Working Paper 19452, Harvard University OpenScholar.
  8. Tao Zhang & Heng-fu Zou, 1996. "Fiscal decentralization, public spending, and economic growth in China," Policy Research Working Paper Series 1608, The World Bank.
  9. Faguet, Jean-Paul, 2004. "Does decentralization increase government responsiveness to local needs?: Evidence from Bolivia," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 867-893, March.
  10. Olivier Blanchard & Andrei Shleifer, 2000. "Federalism With and Without Political Centralization. China versus Russia," Harvard Institute of Economic Research Working Papers 1889, Harvard - Institute of Economic Research.
  11. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
  12. Enikolopov, Ruben & Zhuravskaya, Ekaterina, 2003. "Decentralization and Political Institutions," CEPR Discussion Papers 3857, C.E.P.R. Discussion Papers.
  13. Isaac Ehrlich & Francis T. Lui, 1999. "Bureaucratic Corruption and Endogenous Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S270-S293, December.
  14. Noel Johnson & Courtney LaFountain & Steven Yamarik, 2011. "Corruption is bad for growth (even in the United States)," Public Choice, Springer, vol. 147(3), pages 377-393, June.
  15. Engin Dalgic & Ngo Van Long, 2004. "Corrupt Local Government as Resource Farmers: The Helping Hand and the Grabbing Hand," CESifo Working Paper Series 1248, CESifo Group Munich.
  16. Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
  17. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  18. Philip Keefer & Stephen Knack, 2007. "Boondoggles, Rent-Seeking, and Political Checks and Balances: Public Investment under Unaccountable Governments," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 566-572, August.
  19. Toke S. Aidt, 2009. "Corruption, institutions, and economic development," Oxford Review of Economic Policy, Oxford University Press, vol. 25(2), pages 271-291, Summer.
  20. Rock, Michael T. & Bonnett, Heidi, 2004. "The Comparative Politics of Corruption: Accounting for the East Asian Paradox in Empirical Studies of Corruption, Growth and Investment," World Development, Elsevier, vol. 32(6), pages 999-1017, June.
  21. Bardhan, Pranab & Mookherjee, Dilip, 2005. "Decentralizing antipoverty program delivery in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 675-704, April.
  22. Martin Besfamille, 2004. "Collusion In Local Public Works," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1193-1219, November.
  23. Pierre-Daniel G. Sarte, 1999. "Informality and rent-seeking bureaucracies in a model of long-run growth," Working Paper 99-07, Federal Reserve Bank of Richmond.
  24. Jorge Martinez-Vazquez & Robert McNab, 2001. "Fiscal Decentralization and Economic Growth," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0101, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  25. Fisman, Raymond & Gatti, Roberta, 2002. "Decentralization and corruption: evidence across countries," Journal of Public Economics, Elsevier, vol. 83(3), pages 325-345, March.
  26. Blackburn, Keith & Bose, Niloy & Emranul Haque, M., 2006. "The incidence and persistence of corruption in economic development," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2447-2467, December.
  27. Banerjee, Abhijit V, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1289-1332, November.
  28. Barreto, Raul A., 2000. "Endogenous corruption in a neoclassical growth model," European Economic Review, Elsevier, vol. 44(1), pages 35-60, January.
  29. Besley, Timothy & Coate, Stephen, 2003. "Centralized versus decentralized provision of local public goods: a political economy approach," Journal of Public Economics, Elsevier, vol. 87(12), pages 2611-2637, December.
  30. Vial, Virginie & Hanoteau, Julien, 2010. "Corruption, Manufacturing Plant Growth, and the Asian Paradox: Indonesian Evidence," World Development, Elsevier, vol. 38(5), pages 693-705, May.
  31. Hoyt, William H., 1991. "Property taxation, Nash equilibrium, and market power," Journal of Urban Economics, Elsevier, vol. 30(1), pages 123-131, July.
  32. Vito Tanzi, 1998. "Corruption Around the World," IMF Working Papers 98/63, International Monetary Fund.
  33. Juan D. CARRILLO, 2000. "Corruption in Hierarchies," Annales d'Economie et de Statistique, ENSAE, issue 59, pages 37-61.
  34. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  35. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fce:doctra:1221. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francesco Saraceno).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.