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Economic Growth, Health, and the Choice of Polluting Technologies: The Role of Bureaucratic Corruption

  • Dimitrios Varvarigos

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    I model an economy where the adverse health effects of pollution impede labour productivity and capital accumulation is the source of economic growth. Pollution is generated by firms that choose whether to employ a dirty technology and pay an environmental tax, or employ a clean technology and incur the cost of its adoption. The task of inspecting the environmental impact of each firm’s production technology is delegated to bureaucrats who are corruptible since they receive bribes in order to mislead authorities on the firms’ actual technology choice. The model can generate multiple steady state equilibria. In this context, the multiplicity of equilibria is associated with indeterminacy, due to the self-fulfilling nature of corruption incentives and the relevant implications for pollution, productivity and economic growth.

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    Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 13/22.

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    Date of creation: Sep 2013
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    Handle: RePEc:lec:leecon:13/22
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