Corruption, uncertainty and growth
AbstractCorruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effects of this uncertainty, a stochastic dynamic growth model with the public sector is examined. It is shown that deterministic excessive red tape and corruption deteriorate the growth potential through income redistribution and public sector inefficiencies. Most importantly, it is demonstrated that the increase in corruption via higher uncertainty exerts adverse effects on capital accumulation, thus leading to lower growth rates.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 3716.
Date of creation: 26 Jun 2007
Date of revision:
Corruption; growth; public goods; tax evasion; uncertainty;
Find related papers by JEL classification:
- E20 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Financing, Investment, and Capacity
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-30 (All new papers)
- NEP-DEV-2007-06-30 (Development)
- NEP-DGE-2007-06-30 (Dynamic General Equilibrium)
- NEP-MAC-2007-06-30 (Macroeconomics)
- NEP-POL-2007-06-30 (Positive Political Economics)
- NEP-REG-2007-06-30 (Regulation)
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