Frictions to Political Competition and Financial Openness
AbstractIn this paper we present a political economy approach in order to explain the degree of financial openness for an economy. In the model, entrepreneurs, who may have good or bad projects, vote for policies, which are proposed by selfi sh politicians. Two political frictions (ideological adherence and a super- majority requirement) impair political competition and lead to equilibria, where politicians receive corruption bribes. Furthermore, the model implies a non-monotonic relationship between financial openness and corruption and a positive relationship between financial openness and government size. Some of the model predictions are consistent with empirical findings while other predictions have not beeen tested yet.
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Bibliographic InfoPaper provided by Courant Research Centre PEG in its series Courant Research Centre: Poverty, Equity and Growth - Discussion Papers with number 59.
Date of creation: 20 Jan 2011
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corruption; fi nancial openness; ideology; politicians;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
- P43 - Economic Systems - - Other Economic Systems - - - Finance; Public Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-05 (All new papers)
- NEP-MIC-2011-02-05 (Microeconomics)
- NEP-POL-2011-02-05 (Positive Political Economics)
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