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A THEORY OF THE CORRUPT KEYNESIAN


Type

Working Paper

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Authors

Aidt, TS 
Dutta, J 

Abstract

AbstractWe evaluate the impact of real business cycle shocks on corruption and economic policy in a model of entry regulation in a representative democracy. We find that corruption is pro-cyclical and regulation policy is counter-cyclical. Corrupt politicians engage in excessive stabilization of aggregate fluctuations and behave as if they were Keynesian. We also find that business cycle shocks can induce political instability with politicians losing office in recessions.

Description

Keywords

Corruption, entry regulation, performance voting, business cycles, GROWTH, PERSISTENCE

Is Part Of

New and Enduring Themes in Development Economics

Publisher

Faculty of Economics