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Public Expenditures, Bureaucratic Corruption and Economic Development

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  • Keith Blackburn
  • Niloy Bose
  • M. Emranul Haque

Abstract

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.

Suggested Citation

  • Keith Blackburn & Niloy Bose & M. Emranul Haque, 2004. "Public Expenditures, Bureaucratic Corruption and Economic Development," CDMA Conference Paper Series 0407, Centre for Dynamic Macroeconomic Analysis.
  • Handle: RePEc:san:cdmacp:0407
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    3. M. Emranul Haque & Richard Kneller, 2015. "Why does Public Investment Fail to Raise Economic Growth? The Role of Corruption," Manchester School, University of Manchester, vol. 83(6), pages 623-651, December.
    4. Olofinbiyi, Tolulope & Mogues, Tewodaj, 2017. "Who Influences Government Spending in Agriculture? The Roles of Public Actors in Subnational Funding Allocation in Nigeria," Feed the Future Innovation Lab for Food Security Policy Research Papers 259572, Michigan State University, Department of Agricultural, Food, and Resource Economics, Feed the Future Innovation Lab for Food Security (FSP).
    5. Lim, King Yoong, 2019. "Modelling the dynamics of corruption and unemployment with heterogeneous labour," Economic Modelling, Elsevier, vol. 79(C), pages 98-117.
    6. Rajeev K. Goel & James W. Saunoris, 2016. "Military Buildups, Economic Development and Corruption," Manchester School, University of Manchester, vol. 84(6), pages 697-722, December.
    7. Keith Blackburn & Gareth Downing, 2015. "Deconcentration, Corruption and Economic Growth," Centre for Growth and Business Cycle Research Discussion Paper Series 209, Economics, The Univeristy of Manchester.
    8. King Yoong Lim, 2017. "The Dynamics of Corruption and Unemployment in a Growth Model with Heterogeneous Labour," Working Papers 198144263, Lancaster University Management School, Economics Department.
    9. Torrisi, Gianpiero, 2009. "Public infrastructure: definition, classification and measurement issues," MPRA Paper 12990, University Library of Munich, Germany.
    10. Chakraborty Shankha & Dabla-Norris Era, 2011. "The Quality of Public Investment," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-29, August.
    11. Omar A. Guerrero & Gonzalo Casta~neda, 2019. "Does Better Governance Guarantee Less Corruption? Evidence of Loss in Effectiveness of the Rule of Law," Papers 1902.00428, arXiv.org.

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