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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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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 & Sibert, Anne, 1988. "Elections and Macroeconomic Policy Cycles," Review of Economic Studies, Wiley Blackwell, vol. 55(1), pages 1-16, January.
  2. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  3. Timothy Besley & Anne Case, 1992. "Incumbent Behavior: Vote Seeking, Tax Setting and Yardstick Competition," NBER Working Papers 4041, National Bureau of Economic Research, Inc.
  4. Dalgic, Engin & Long, Ngo Van, 2006. "Corrupt local governments as resource farmers: The helping hand and the grabbing hand," European Journal of Political Economy, Elsevier, vol. 22(1), pages 115-138, March.
  5. 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).
  6. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
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