Public investment under ethnic diversity and political uncertainty
This paper addresses the puzzle that public services in some developing countries, especially in Africa, are poor despite large public expenditure. The intertemporal model here studies a government’s optimal choice between redistribution and public investment. Ethnic diversity and political uncertainty reinforce one another in producing myopic government behaviour which results in underinvestment. Above some critical value of political instability, it is optimal for the government not to invest at all.
|Date of creation:||Jan 2005|
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- William Easterly & Ross Levine, 1997.
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- Frank Bohn, 2004. "The trade-off between monetary and fiscal solidity : international lenders and political instability," Working Papers 200408, School of Economics, University College Dublin. Full references (including those not matched with items on IDEAS)
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