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Long-run implications of government budget leakage in a Solow-Swan economy: An evolutionary game approach

Author

Listed:
  • Gilberto Tadeu Lima

  • Jaylson Jair da Silveira

Abstract

There is mounting evidence of persistent capture or drainage of government budgetary resources through unlawful means by individuals in the rest of the economy. This paper develops a formal analytical framework in which such persistence arises as a stable evolutionary equilibrium configuration. Also in keeping with the empirical evidence, this evolutionary equilibrium is characterized by behavioral heterogeneity across decision makers who periodically choose whether or not to engage in illegal activities of capture of government resources. A key implication is that the macrodynamics of the capital stock in per capita terms and the per capita income are crucially affected by the frequency of capturing behavior in the economy in a complex way.

Suggested Citation

  • Gilberto Tadeu Lima & Jaylson Jair da Silveira, 2024. "Long-run implications of government budget leakage in a Solow-Swan economy: An evolutionary game approach," Working Papers, Department of Economics 2024_29, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2024wpecon29
    as

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    File URL: http://www.repec.eae.fea.usp.br/documentos/Lima_Silveira_29WP.pdf
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    References listed on IDEAS

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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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