Corruption, Inequality and Fairness
Alberto F. Alesina
Harvard University - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)
Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)
April 29, 2005
MIT Department of Economics Working Paper No. 05-16; Harvard Institute of Economic Research Discussion Paper No. 2070
Bigger governments raise the possibilities for corruption; more corruption may in turn raise the support for redistributive policies that intend to correct the inequality and injustice generated by corruption. We formalize these insights in a simple dynamic model. A positive feedback from past to current levels of taxation and corruption arises either when wealth originating in corruption and rent seeking is considered unfair, or when the ability to engage in corruption is unevenly distributed in the population. This feedback introduces persistence in the size of the government and the levels of corruption and inequality. Multiple steady states exist in some cases.
Number of Pages in PDF File: 26
Keywords: Corruption, rent seeking, inequality, fairness, redistribution, political economy
JEL Classification: D31, E62, H2, P16
Date posted: May 8, 2005
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