A Theory of the Corrupt Keynesian

Toke S Aidt () and Jayasri Dutta

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We evaluate the impact of real business cycle shocks on corruption and economic policy in a model of entry regulation in a representative democracy. We .nd that corruption is procyclical 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.

Keywords: Corruption; entry regulation; performance voting; business cycles. (search for similar items in EconPapers)
JEL-codes: D72 K42 O41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-dge, nep-hpe, nep-law, nep-mac, nep-pke and nep-pol
Date: 2008-12
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Persistent link: http://EconPapers.repec.org/RePEc:cam:camdae:0861

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