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Yardstick Competition, Corruption, and Electoral Incentives

  • Ngo Van Long
  • Bodhisattva Sengupta

This paper investigates the relationship between electoral incentives, institutions and corruption. We assume that voters use a yardstick criterion. The incumbent provides a public good and extracts rent, which are financed by imposing a distortionary tax. We demonstrate the possibility that yardstick competition itself fails to restrict rent seeking. We complement the static setting with a dynamic scenario where each incumbent politician faces an election after a finite, fixed term. Under relative performance evaluation, dynamic incentives impose more restriction on rent appropriation in comparison to the static case.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2008/wp-cesifo-2008-07/cesifo1_wp2345.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2345.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2345
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  1. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
  2. Engin Dalgic & Ngo Van Long, 2004. "Corrupt Local Government as Resource Farmers: The Helping Hand and the Grabbing Hand," CESifo Working Paper Series 1248, CESifo Group Munich.
  3. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  4. BELLEFLAMME, Paul & HINDRIKS, Jean, 2002. "Yardstick competition and political agency problems," CORE Discussion Papers 2002029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Rogoff, Kenneth & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  6. Besley, Timothy & Case, Anne, 1995. "Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition," American Economic Review, American Economic Association, vol. 85(1), pages 25-45, March.
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