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Modelling the dynamics of corruption and unemployment with heterogeneous labour

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  • Lim, King Yoong

Abstract

This paper presents an endogenous growth model with heterogeneous labour, endogenous unemployment, and public sector corruption. Unlike most previous studies, the model does not separate public officials and private individuals into two distinct groups. Instead, taking up bureaucratic appointment as a public servant is modelled as an occupational choice, which then allows for the endogenous determination of the proportion of public officials, the share of corrupt officials among them, and the public investment efficiency of the economy. The dynamics of endogenous corruption and unemployment are studied using numerical policy experiments based on a stylized representation of a middle-income African economy with high corruption and unemployment. The main finding is that, large-scale public infrastructure push has no effect on raising growth in an economy with high corruption. However, if preceded by social and anti-corruption policies that successfully induce a structural change, it will then be effective in raising growth.

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  • Lim, King Yoong, 2019. "Modelling the dynamics of corruption and unemployment with heterogeneous labour," Economic Modelling, Elsevier, vol. 79(C), pages 98-117.
    • Handle: RePEc:eee:ecmode:v:79:y:2019:i:c:p:98-117
    DOI: 10.1016/j.econmod.2018.10.004
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    More about this item

    Keywords

    Economic growth; Corruption; Public sector efficiency; Unemployment;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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