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Public Expenditures, Bureaucratic Corruption and Economic Development

  • Keith Blackburn
  • Niloy Bose
  • M. Emranul Haque

This paper presents a dynamic general equilibrium analysis of public sector corruption and economic growth. In an economy with government intervention and capital accumulation, state-appointed bureaucrats are charged with the responsibility for procuring public goods which contribute to productive efficiency. Corruption arises because of an opportunity for bureaucrats to appropriate public funds by misinforming the government about the cost and quality of public goods provision. The incentive for each bureaucrat to do this depends on economy-wide outcomes which, in turn, depend on the behaviour of all bureaucrats. We establish the existence of multiple development regimes, together with the possibility of multiple, frequency-dependent equilibria. The predictions of our analysis accord strongly with recent empirical evidence on the causes and consequences of corruption in public office.

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File URL: http://www.socialsciences.manchester.ac.uk/medialibrary/economics/discussionpapers/EDP-0530.pdf
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Paper provided by Economics, The University of Manchester in its series The School of Economics Discussion Paper Series with number 0530.

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Date of creation: 2005
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Handle: RePEc:man:sespap:0530
Contact details of provider: Postal: Manchester M13 9PL
Phone: (0)161 275 4868
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Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/

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