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How corruption in government affects public welfare: A review of theory

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  • Lambsdorff, Johann

Abstract

The objectives of government are pivotal to understanding the diverse negative effects of corruption on public welfare. Corruption renders governments unable or unwilling to maximize welfare. In the first case, it distorts agents' decisions and limits the contractual space available to agents and the government, acting as a benevolent principal. In the second case, a corrupt principal creates allocative inefficiencies, cripples its credible commitment to effective policies, and opens the door to opportunism.

Suggested Citation

  • Lambsdorff, Johann, 2001. "How corruption in government affects public welfare: A review of theory," Center for European, Governance and Economic Development Research Discussion Papers 9, University of Goettingen, Department of Economics.
  • Handle: RePEc:zbw:cegedp:9
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    References listed on IDEAS

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    More about this item

    Keywords

    Corruption; welfare; principal-agent-theory; rent-seeking; x-inefficiency; kleptocracy; opportunism;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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