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PUBLIC EXPENDITURES, BUREAUCRATIC CORRUPTION AND ECONOMIC DEVELOPMENT *
Author(s) -
BLACKBURN KEITH,
BOSE NILOY,
HAQUE M. EMRANUL
Publication year - 2011
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2009.02168.x
Subject(s) - economics , language change , public good , economic interventionism , bureaucracy , incentive , government (linguistics) , public economics , public capital , public sector , capital (architecture) , microeconomics , economy , public investment , public fund , art , literature , politics , political science , law , linguistics , philosophy , archaeology , history
We present 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 responsibile 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.