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Public Expenditures, Bureaucratic Corruption and Economic Development

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  • Keith Blackburn
  • Niloy Bose
  • M. Emranul Haque
Abstract
This paper presents 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 charged with the responsibility 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 on the causes and consequences of corruption in public office.

Suggested Citation

  • Keith Blackburn & Niloy Bose & M. Emranul Haque, 2004. "Public Expenditures, Bureaucratic Corruption and Economic Development," CDMA Conference Paper Series 0407, Centre for Dynamic Macroeconomic Analysis.
    • Handle: RePEc:san:cdmacp:0407
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