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Wheels and cycles: Suboptimality and volatility of corrupted economies

Author

Listed:
  • Stefano Bosi

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay, Université Paris-Saclay)

  • David Desmarchelier

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Thai Ha-Huy

    (Université Paris-Saclay, EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay)

Abstract

We consider a simple economy where production depends on labor supply and social capital. Networking increases the social capital ("greases the wheel") but also the corruption level ("sands the wheel"). Corruption is a negative productive externality. We compare the market economy, where the negative externality is not taken into account by individuals, with a centralized economy, where the planner internalizes the negative effect. We highlight the possible existence of cycles in the market economy and optimal cycles in the planned economy. We compare the centralized and the decentralized solutions in the short and long run.

Suggested Citation

  • Stefano Bosi & David Desmarchelier & Thai Ha-Huy, 2022. "Wheels and cycles: Suboptimality and volatility of corrupted economies," Post-Print hal-03982895, HAL.
    • Handle: RePEc:hal:journl:hal-03982895
    DOI: 10.1111/ijet.12323
    Note: View the original document on HAL open archive server: https://hal.univ-lorraine.fr/hal-03982895
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Corruption; Optimal cycles; Ramsey model;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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