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How corruption in government affects public welfare: A review of theory

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  • Lambsdorff, Johann
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    Abstract

    The objectives of government are pivotal to understanding the diverse negative effects of corruption on public welfare. Corruption renders governments unable or unwilling to maximize welfare. In the first case, it distorts agents’ decisions and limits the contractual space available to agents and the government, acting as a benevolent principal. In the second case, a corrupt principal creates allocative inefficiencies, cripples its credible commitment to effective policies, and opens the door to opportunism. --

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    File URL: http://econstor.eu/bitstream/10419/32018/1/500238685.pdf
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    Bibliographic Info

    Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 9.

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    Date of creation: 2001
    Date of revision:
    Handle: RePEc:zbw:cegedp:9

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    Postal: Platz der Göttinger Sieben 3, 37073 Göttingen
    Web page: http://www.cege.wiso.uni-goettingen.de/
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    Related research

    Keywords: Corruption; welfare; principal-agent-theory; rent-seeking; x-inefficiency; kleptocracy; opportunism;

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    1. Olsen, T.E. & Torsvik, G., 1998. "Collusion and Renegotiation in Hierarchies: A Case of Beneficial Corruption," Norway; Department of Economics, University of Bergen 179, Department of Economics, University of Bergen.
    2. Acemoglu, D. & Verdier, T., 1997. "The Choice between Market Failures and Corruption," DELTA Working Papers 97-06, DELTA (Ecole normale supérieure).
    3. Button, Kenneth J & Weyman-Jones, Thomas G, 1994. " X-Efficiency and Technical Efficiency," Public Choice, Springer, vol. 80(1-2), pages 83-104, July.
    4. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    5. Strausz, Roland, 1997. " Collusion and Renegotiation in a Principal-Supervisor-Agent Relationship," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(4), pages 497-518, December.
    6. William M. Landes & Richard A. Posner, 1975. "The Independent Judiciary in an Interest-Group Perspective," NBER Working Papers 0110, National Bureau of Economic Research, Inc.
    7. Stigler, George J, 1976. "The Xistence of X-Efficiency," American Economic Review, American Economic Association, vol. 66(1), pages 213-16, March.
    8. Acemoglu, Daron & Verdier, Thierry, 1996. "Property Rights, Corruption and the Allocation of Talent: A General Equilibrium Approach," CEPR Discussion Papers 1494, C.E.P.R. Discussion Papers.
    9. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    10. Orchard, Lionel & Stretton, Hugh, 1997. "Public Choice," Cambridge Journal of Economics, Oxford University Press, vol. 21(3), pages 409-30, May.
    11. 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.
    12. Jonathan Isham & Daniel Kaufmann, 1999. "The Forgotten Rationale For Policy Reform: The Productivity Of Investment Projects," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 149-184, February.
    13. Leibenstein, Harvey, 1973. "Competition and X-Efficiency: Reply," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 765-77, May-June.
    14. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
    15. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
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