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A note on poor-institution traps in international fiscal policy game

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  • Pierre-Henri Faure

    () (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - Université Montesquieu - Bordeaux 4)

Abstract

This note explores the link between the effort level to strengthen institutional quality and the nature of the fiscal policy game among interdependent economies plagued by corruption. Every country has a lower incentive to improve public governance when the effort made abroad to remedy institutional deficiencies becomes weaker. More importantly, the model highlights a possible trade-off between fighting corruption in interrelated developing countries and promoting fiscal policy coordination among them: cooperation goes together with the acceptance of more corruption. It follows that poor-institution traps can be Pareto-improving.

Suggested Citation

  • Pierre-Henri Faure, 2011. "A note on poor-institution traps in international fiscal policy game," Post-Print hal-00610540, HAL.
  • Handle: RePEc:hal:journl:hal-00610540
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00610540v2
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    References listed on IDEAS

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    1. Carsten Hefeker, 2010. "Taxation, corruption and the exchange rate regime," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 338-346, March.
    2. Aidt, Toke & Dutta, Jayasri & Sena, Vania, 2008. "Governance regimes, corruption and growth: Theory and evidence," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 195-220, June.
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    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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