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Institutionalized Corruption And Privilege In China'S Socialist Market Economy: A General Equilibrium Analysis


  • Ke Li
  • Russell Smyth
  • Shuntian Yao


This paper develops a general equilibrium model to consider the effects of corruption caused by institutionalized privilege on economic welfare, the network size of division of labour and productivity. First a Walrasian equilibrium in a market economy is computed; then we consider the effects on welfare when a privileged group is chosen to work as high-level administrators. Finally, we allow for explicit collusion between administrators by introducing an administrator's agent who acts in the interests of all the administrators. The model shows that in equilibrium (fixed point) the degree of corruption, the degree of division of labour and productivity are interdependent. Copyright 2005 Blackwell Publishing Ltd

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  • Ke Li & Russell Smyth & Shuntian Yao, 2005. "Institutionalized Corruption And Privilege In China'S Socialist Market Economy: A General Equilibrium Analysis," Pacific Economic Review, Wiley Blackwell, vol. 10(3), pages 341-360, October.
  • Handle: RePEc:bla:pacecr:v:10:y:2005:i:3:p:341-360

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    Cited by:

    1. Xiaobing Wang, 2009. "Regulation and Corruption in Transitional China," The School of Economics Discussion Paper Series 0920, Economics, The University of Manchester.

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