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Rent-seeking bureaucracies and oversight in a simple growth model

  • Sarte, Pierre-Daniel G.

Following recent cross-country empirical work, research on public policy and growth has come to examine the impact of inefficient or corrupt bureaucracies. Most of this work has emphasized the interactions of bureaucracies with private markets. By contrast, this paper focuses on the relationship between rent-seeking bureaucracies and their political authority. We show that when oversight is relatively costly, as in many developing economies, the political authority exercises little monitoring of its agencies which reduces the effectiveness of productive government spending. Moreover, when the technology used to provide public services is poor, bureaus better succeed in requesting overly large budgets before triggering any monitoring. Both of these characteristics contribute to reducing the growth rate of already poor economies.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 25 (2001)
Issue (Month): 9 (September)
Pages: 1345-1365

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Handle: RePEc:eee:dyncon:v:25:y:2001:i:9:p:1345-1365
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  1. Robert J. Barro, 1988. "Government Spending in a Simple Model of Endogenous Growth," NBER Working Papers 2588, National Bureau of Economic Research, Inc.
  2. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  3. Robert Townsend, 1979. "Optimal contracts and competitive markets with costly state verification," Staff Report 45, Federal Reserve Bank of Minneapolis.
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  9. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
  10. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-38, October.
  11. Turnovsky, Stephen J, 1996. "Fiscal Policy, Adjustment Costs, and Endogenous Growth," Oxford Economic Papers, Oxford University Press, vol. 48(3), pages 361-81, July.
  12. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
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  14. Ayal, Eliezer B. & Karras, Georgios, 1996. "Bureaucracy, investment, and growth," Economics Letters, Elsevier, vol. 51(2), pages 233-239, May.
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