Corruption: Political Determinants and Macroeconomic Effects
Abstract
Two aspects of corruption are examined theoretically: its effect on macroeconomic variables, and its determination from the political environment. Corruption is defined in an occupational choice model as the extra fees or bribes that must be paid by some entrepreneurs. Even in an environment of perfect information and well-defined property rights, wages and total output decrease with the level of corruption. Inverted-U relationships of income inequality with both corruption and output are calculated. Second, two types of decentralization, regional and bureaucratic, are analyzed. The effects depend crucially on agents' mobility across regions. Under imperfect mobility assumptions, corruption decreases with regional decentralization and increases with bureaucratic decentralization. Two methods of controlling corruption are analyzed in this setting: democratic accountability and incentive payments. The same factor that makes bureaucratic decentralization more corrupt makes it more resistant to efforts to rein in corruption; the reverse is true for regional decentralization. This model matches emerging stylized facts relating corruption to output, inequality, and decentralization, and reinterprets findings linking bureaucratic wage levels and corruption.Download Info
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Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0126.Length:
Date of creation: Aug 2001
Date of revision:
Handle: RePEc:van:wpaper:0126
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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html
Related research
Keywords: Corruption; decentralization; electoral accountability; optimal wage policy;Find related papers by JEL classification:
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2005.
"Distribution and Development in a Model of Misgovernance,"
Proceedings of the German Development Economics Conference, Kiel 2005
15, Verein für Socialpolitik, Research Committee Development Economics.
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"Corruption And The Shadow Economy,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 817-836, 08.
- Jay Pil Choi & Marcel Thum, 2002. "Corruption and the Shadow Economy," CESifo Working Paper Series 633, CESifo Group Munich.
- Choi, Jay Pil & Thum, Marcel, 2003. "Corruption and the shadow economy," Dresden Discussion Paper Series in Economics 02/03, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
- Fabrizio Carmignani, 2005.
"Efficiency Of Institutions, Political Stability And Income Dynamics,"
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- Fabrizio Carmignani, 2007. "Efficiency of Institutions, Political Stability and Income Dynamics," The IUP Journal of Managerial Economics, IUP Publications, vol. 0(1), pages 6-30, February.
- Osipian, Ararat, 2008. "The World is Flat: Modeling Educators’ Misconduct with Cellular Automata," MPRA Paper 7592, University Library of Munich, Germany.
- Shah, Anwar, 2006. "Corruption and decentralized public governance," Policy Research Working Paper Series 3824, The World Bank.
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