Frictions to Political Competition and Financial Openness

Aristotelis Boukouras and Kostas Koufopoulos
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Aristotelis Boukouras: Georg-August-University Göttingen
Kostas Koufopoulos: University of Warwick

No 59, Courant Research Centre: Poverty, Equity and Growth - Discussion Papers from Courant Research Centre PEG

Abstract: In this paper we present a political economy approach in order to explain the degree of financial openness for an economy. In the model, entrepreneurs, who may have good or bad projects, vote for policies, which are proposed by selfi sh politicians. Two political frictions (ideological adherence and a super- majority requirement) impair political competition and lead to equilibria, where politicians receive corruption bribes. Furthermore, the model implies a non-monotonic relationship between financial openness and corruption and a positive relationship between financial openness and government size. Some of the model predictions are consistent with empirical findings while other predictions have not beeen tested yet.

Keywords: corruption; fi nancial openness; ideology; politicians (search for similar items in EconPapers)
JEL-codes: G21 G28 H32 P16 P43 (search for similar items in EconPapers)
Date: 2011-01-20
New Economics Papers: this item is included in nep-mic and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:got:gotcrc:059

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