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Public Investment under Ethnic Diversity and Political Uncertainty

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  • Frank Bohn

    (University College of Dublin)

Abstract

This paper addresses the puzzle that public services in some developing countries, especially in Africa, are poor despite large public expenditure. The intertemporal model here studies a government’s optimal choice between redistribution and public investment. Ethnic diversity and political uncertainty reinforce one another in producing myopic government behaviour which results in underinvestment. Above some critical value of political instability, it is optimal for the government not to invest at all.

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File URL: http://www.ucd.ie/economics/research/papers/2005/WP05.01.pdf
File Function: First version, 2005
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200501.

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Length: 21 pages
Date of creation: 19 Jan 2005
Date of revision:
Handle: RePEc:ucn:wpaper:200501

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Related research

Keywords: political instability; myopic behaviour; public finance; corruption; political economy; developing countries;

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  1. Robinson, James A & Torvik, Ragnar, 2002. "White Elephants," CEPR Discussion Papers 3459, C.E.P.R. Discussion Papers.
  2. Alex Cukierman & Sebastian Edwards & Guido Tabellini, 1989. "Seigniorage and Political Instability," NBER Working Papers 3199, National Bureau of Economic Research, Inc.
  3. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 760-81, August.
  4. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
  5. Pierre-Guillaume Méon & Khalid Sekkat, 2005. "Does corruption grease or sand the wheels of growth?," Public Choice, Springer, vol. 122(1), pages 69-97, January.
  6. Devereux, Michael B. & Wen, Jean-Francois, 1998. "Political instability, capital taxation, and growth," European Economic Review, Elsevier, vol. 42(9), pages 1635-1651, November.
  7. Paul Collier & Jan Willem Gunning, 1999. "Why Has Africa Grown Slowly?," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 3-22, Summer.
  8. Frank Bohn, 2004. "The Trade-off between Monetary and Fiscal Solidity - International Lenders and Political Instability," Working Papers 200408, School Of Economics, University College Dublin.
  9. Beck, Paul J. & Maher, Michael W., 1986. "A comparison of bribery and bidding in thin markets," Economics Letters, Elsevier, vol. 20(1), pages 1-5.
  10. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  11. Lien, Da-Hsiang Donald, 1986. "A note on competitive bribery games," Economics Letters, Elsevier, vol. 22(4), pages 337-341.
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