Endogenous Corruption in Economic Development

University of Nottingham, GEP Research Paper No. 2004/16

33 Pages Posted: 28 Jul 2005

See all articles by Keith Blackburn

Keith Blackburn

University of Manchester - School of Social Sciences

Niloy Bose

University of Wisconsin at Milwaukee - Department of Economics; Virginia Polytechnic Institute & State University - Department of Economics

M. Emranul Haque

University of Nottingham

Date Written: 2004

Abstract

This paper presents an analysis of the joint determination of bureaucratic corruption and economic development. The analysis is based on a simple neo-classical growth model in which bureaucrats are employed as agents of the government to collect taxes from households. Corruption is reflected in bribery and tax evasion as bureaucrats conspire with households to provide false information to the government. Costly concealment of this activity leads to a loss of resources available for productive investments. The incentive for a bureaucrat to accept a bribe depends on economy-wide outcomes, which in turn, depend of the number of other bureaucrats who accept bribes. We establish the existence of multiple of development regimes, together with the possibility of multiple, frequency-dependent equilibria. The predictions of our analysis accord strongly with recent empirical evidence.

Keywords: Corruption, Bribery, Tax Evasion, Development

JEL Classification: D73, H26, O11

Suggested Citation

Blackburn, Keith and Bose, Niloy and Haque, Mohammad Emranul, Endogenous Corruption in Economic Development (2004). University of Nottingham, GEP Research Paper No. 2004/16, Available at SSRN: https://ssrn.com/abstract=761705 or http://dx.doi.org/10.2139/ssrn.761705

Keith Blackburn (Contact Author)

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Niloy Bose

University of Wisconsin at Milwaukee - Department of Economics ( email )

Bolton Hall
Milwaukee, WI 53211
United States
414-229-6132 (Phone)

HOME PAGE: http://www.uwm.edu/Dept/Economics/faculty/bose.html

Virginia Polytechnic Institute & State University - Department of Economics ( email )

3021 Pamplin Hall
Blacksburg, VA 24061
United States

Mohammad Emranul Haque

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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