A note on poor-institution traps in international fiscal policy game
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.
|Date of creation:||19 Jan 2011|
|Publication status:||Published in Economics Bulletin, Economics Bulletin, 2011, 31 (1), pp. 375-387|
|Note:||View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00610540v2|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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- Carsten Hefeker, 2009.
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