Crony Capitalism and Financial System Stability

15 Pages Posted: 5 Jun 2006

See all articles by Joseph Haslag

Joseph Haslag

University of Missouri at Columbia - Department of Economics

Rowena Pecchenino

NUI Maynooth - Department of Economics

Abstract

Prior to the Asian financial crisis, the cozy relationships between corporations, governments, and banks were seen as a potent force for economic growth and development. In this article we examine the institution of crony capitalism. Under conditions in which the Second Welfare Theorem does not hold, there is a role for government. Some governmental institutions do encourage more risky, high-payoff entrepreneurial activities. Our aim is to examine crony capitalism as a potential source of government activity that enhances economic productivity. In addition, we explore the conditions under which the government activity can instigate a financial crisis. (JEL G28, G21, E32)

Suggested Citation

Haslag, Joseph and Pecchenino, Rowena, Crony Capitalism and Financial System Stability. Economic Inquiry, Vol. 43, Issue 1, pp. 24-38, 2005, Available at SSRN: https://ssrn.com/abstract=906217

Joseph Haslag (Contact Author)

University of Missouri at Columbia - Department of Economics ( email )

118 Professional Building
Columbia, MO 65211
United States

Rowena Pecchenino

NUI Maynooth - Department of Economics ( email )

County Kildare
Ireland
35317083751 (Phone)
35317083934 (Fax)

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