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Benefit sharing: An incentive mechanism for social control of government expenditure

Author

Listed:
  • Bugarin, Mauricio
  • Vieira, Laercio

Abstract

The present paper analyzes the incentives individual members of society face to contribute to a nation's efforts in controlling corruption. A Principal-Agent model is constructed, leading to the following results. First, although individual agents do have an interest in devoting a portion of their resources to the nation's control effort, the opportunity cost of the effort and a free rider problem blocks the spontaneous provision of individual support to corruption control. Second, to cope with those incentives, a new welfare improving mechanism is proposed, which aligns individual incentives with those of society at no extra cost to the government.

Suggested Citation

  • Bugarin, Mauricio & Vieira, Laercio, 2008. "Benefit sharing: An incentive mechanism for social control of government expenditure," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(4), pages 673-690, November.
  • Handle: RePEc:eee:quaeco:v:48:y:2008:i:4:p:673-690
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    References listed on IDEAS

    as
    1. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    2. Mohsin Habib & Leon Zurawicki, 2002. "Corruption and Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(2), pages 291-307, June.
    3. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
    4. repec:cup:apsrev:v:92:y:1998:i:03:p:663-673_21 is not listed on IDEAS
    5. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-141, January.
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