Ratbek, Ratbek (2010): Nonlinear effect of corruption, uncertainty, and growth.
Download (125Kb) | Preview
Corruption in the public sector is manifested both in collusive and noncollusive forms. Collusive corruption erodes tax compliance and leads to higher tax evasion. Noncollusive corruption stems from abuse of the public position by corrupt public officials to extort bribes from the private agents, thus, reduces their income. Importantly, in both types of interaction with the public sector the private agents are bound to face uncertainty with respect to their disposable incomes, as neither bribes paid nor gains from tax evasion are deterministic. To analyze effects of corruption by accounting for the uncertainty caused by it, a stochastic dynamic growth model is considered. The model also incorporates possibility of nonlinear impact of corruption on production, which implies that corruption deteriorates the growth potential by preventing producers to enter high productive sectors. Most importantly, it is demonstrated that the rise of corruption, by increasing uncertainty, exerts adverse effects on capital accumulation, thus leads to lower growth rates. Hence, this paper resolves the theoretical ambiguity with regards to the overall growth effect of corruption obtained in previous studies.
|Item Type:||MPRA Paper|
|Original Title:||Nonlinear effect of corruption, uncertainty, and growth|
|English Title:||Nonlinear effect of corruption, uncertainty, and growth|
|Keywords:||Corruption, uncertainty, growth|
|Subjects:||D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E26 - Informal Economy; Underground Economy
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H26 - Tax Evasion
|Depositing User:||Ratbek Dzhumashev|
|Date Deposited:||10. Sep 2010 17:23|
|Last Modified:||12. Feb 2013 21:04|
Abed, G. T. and e. Gupta, Sanjeev (2002). Governance, corruption, and economic performance. Washington, D.C: International Monetary Fund.
Acemoglu, D. and T. Verdier (1998). Property rights, corruption and the allocation of talent: A general equilibrium approach. Economic Journal 108(450), 1381–1403.
Aidt, T. S. (2003). Economic analysis of corruption: a survey. The Economic Journal 113, F632–F652.
Alam, S. (1989). Anatomy of corruption: An approach to the political economy of underdevelopment. American Journal of Economics and Sociology 48(4), 441–456.
Alesina, A. and G.-M. Angeletos (2005). Corruption, inequality, and fairness. Journal of Monetary Economics 52(7), 1227–44.
Ali, A. M. and H. S. Isse (2003). Determinants of economic corruption: A cross-country comparison. Cato Journal 22(3), 449–466.
Bardhan, P. (1997). Corruption and development: a review of issues. Journal of Economic Literature 35(3), 1320–1347.
Barelli, P. and S. d. A. Pessoa (2002). A model of Capital Accumulation and Rent seeking. CARESS Working Paper No. 02-06. Available at SSRN: http://ssrn.com/abstract=317239.
Barreto, R. A. (2000). Endogenous corruption in a neoclassical growth model. European Economic Review 44(1), 35–60.
Blackburn, K., N. Bose, and M. E. Haque (2005). Public Expenditures, Bureaucratic Corruption and Economic Development.. The University of Manchester, Centre for Growth and Business Cycle Research, DPS 053.
Broadman, H.G. and F. Recanatini (2002). Corruption and Policy: Back to the Roots. Journal of Policy Reform 5, 37–49.
Campos, J. E. L. (2001). Corruption : the boom and bust of East Asia. Quezon City: Ateneo de Manila University Press.
Chen, B. L. (2003). Tax evasion in a model of endogenous growth. Review of Economic Dynamics 6(2), 381–403.
Chen, B. L. (2006). Economic growth with an optimal public spending composition. Oxford Economic Papers 58, 123–136.
Coppier,R. and E. Michetti (2006). Corruption vs production. A non-linear relationship. Economic Modelling 23, 622–637.
Delavallade, C. (2006). Corruption and Distribution of Public Spending in Developing Countries. Journal of Economics and Finance 30(2), 222–239.
Del Monte, A. and E. Papagni (2001). Public expenditure, corruption, and economic growth: the case of Italy. European Journal of POlitical Economy 170, 12–16.
Denizer, C., M. Iyugun, and A. Owen (2000). Finance and Macroeconomic Volatility. World Bank Policy Research Paper No. 2487.
Djankov, S., R. La Porta, F.Lopez-De-Silanes, A. Shleifer (2002). The regulation of entry. Quarterly Journal of Economics 117, 1–37.
Dreher, A. and M. Gassebner (2007). Greasing the wheels of entrepreneurship? The impact of regulations and corruption on firm entry. CESifo Working Paper Series CESifo Working Paper No. 2013, CESifo GmbH.
Futagami, K., Y. Morita, and A. Shibata (1993). Dynamic analysis of an endogenous growth model with public capital. Scandinavian Journal of Economics 95, 525–607.
Huntington, S. P. (1968). Political Order in Changing Societies. New Haven, CT: Yale University Press.
Jain, A. K. (2000). Corruption and Business: A Review. Spellbound Publications.
Keefer, P. and S. Knack (1997). Why don’t poor countries catch up? A cross-national test of institutional explanation. Economic Inquiry 35, 590–602.
Klitgaard, R. (1988). Controlling Corruption. University of California Press, Berkeley.
Knack, S. and P. Keefer (1995). Institutions and economic performance: cross-country test using alternative institutional measures. Economics and Politics 7, 207–227.
Leff, N. (1964). Economic development through bureaucratic corruption. American Behavioral Scientist 8(3), 8–14.
Lin, W.-Z. and C.-C. Yang (2001). A dynamic portfolio choice model of tax evasion: Comparative statics of tax rates and its implication for economic growth. Journal of Economic Dynamics and Control 25, 1827–184.
Liu, F. T. (1985). An equilibrium queuing model of bribery. Journal of Political Economy 93, 760–781.
Liu, F. T. (1996). Three aspects of corruption. Contemporary Economic Policy 14(3), 26–29.
Mauro, P. (1995). Corruption and growth. Quarterly Journal of Economics 110, 681–712.
Mauro, P. (2004). The persistence of corruption and slow economic growth. Imf Staff Papers 51(1), 1–18.
Meon, P.-G. and L. Weill (2006). Is corruption an efficient grease? a cross-country aggregate analysis. In Public Choice Conference 2006, Amsterdam.
Mo, P. H. (2001). Corruption and economic growth. Journal of Comparative Economics 29(1), 66–79.
Pellegrini, L. and R. Gerlagh (2004). Corruption’s effect on growth and its transmission channels. KYKLOS 57(3), 429–456.
Polinsky, A. M. and S. Shavell (2001). Corruption and optimal law enforcement. Journal of Public Economics 81, 1–24.
Rivera-Baitiz, F. L. (2002). Governance, and economic growth: Theory and evidence. Review of Development Economics 6(2), 225–247.
Rose-Ackerman, S. (2004). Corruption. Kluwer Academic.
Sepulveda, F. and F. Mendez (2006). Corruption, growth and political regimes: Cross country evidence. European Journal of Political Economy 22(1), 82–98.
Shleifer, A. and R. W. Vishny (1993). Corruption. The Quarterly Journal of Economics 108(3), 599–617.
Svensson, J. (2005). Eight Questions about Corruption, Journal of Economic Perspectives 19(3), 19–42.
Tanzi, V. (2000). Policies, institutions and the dark side of economics. Cheltenham, UK ; Northampton, Mass., USA: E. Elgar.
Tanzi, V., H. R. Davoodi, and I. M. F. F. A. Dept. (2000). Corruption, growth, and public finances. IMF working paper ; WP/00/182. Washington, D.C.: International Monetary Fund, Fiscal Affairs Department.
Tsoukis, C. and N. J. Miller (2003). Public services and endogenous growth. Journal of Policy Modeling 25, 297–307.
Turnovsky, S. J. (1996). Fiscal policy, adjustment costs and endogenous growth. Oxford Economic Papers 48, 361–381.
Yitzhaki, S. (1974, May). A note on income tax evasion: Theoretical analysis. Journal of Public Economics 3(2), 201–202.