Corruption in an Unstable Environment
In this paper we study the influence of economic stability on the level of corruption in a country, where high stability is defined as a low level of variance in economic output growth. We present a political competition model with exogenous shocks to economic output where politicians can decide about the level of corruption and an election is held within the framework of a Bayesian game. Corruption is assumed to be harmful to the economy and politicians try to maximize income from corrupt activities as well as the probability of getting reelected. We show that independent of the absolute size of economic output growth a low degree of economic stability yields a high level of corruption and vice versa. Thus we conclude that not only does corruption influence economic activity, but also the opposite effect might exist, namely that exogenously caused fluctuations of output influence the readiness of politicians to behave in a corrupt manner. To support our theoretical findings we additionally carry out a cross-country empirical analysis of GDP growth variance and corruption and come to results confirming our thesis.
|Date of creation:||May 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.vwl.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Isaac Ehrlich & Francis T. Lui, 1999. "Bureaucratic Corruption and Endogenous Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S270-S293, December.
- Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-35, December.
- repec:tpr:qjecon:v:115:y:2000:i:4:p:1167-1199 is not listed on IDEAS
- Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
- Alesina, Alberto & Perotti, Roberto, 1996.
"Income distribution, political instability, and investment,"
European Economic Review,
Elsevier, vol. 40(6), pages 1203-1228, June.
- Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc.
- Acemoglu, Daron & Robinson, James A, 1998.
"Why did the West Extend the Franchise? Democracy, Inequality and Growth in Historical Perspective,"
CEPR Discussion Papers
1797, C.E.P.R. Discussion Papers.
- Andvig, Jens Chr. & Moene, Karl Ove, 1990.
"How corruption may corrupt,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 13(1), pages 63-76, January.
- repec:tpr:qjecon:v:110:y:1995:i:3:p:681-712 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:lmu:muenec:367. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tamilla Benkelberg)
If references are entirely missing, you can add them using this form.