A note on poor-institution traps in international fiscal policy games

Pierre-Henri Faure

Economics Bulletin, 2011, vol. 31, issue 1, 375-387

Abstract: This note explores the link between the effort level to strengthen institutional quality and the nature of the fiscal policy game among interdependent economies plagued by corruption. Every country has a lower incentive to improve public governance when the effort made abroad to remedy institutional deficiencies becomes weaker. More importantly, the model highlights a possible trade-off between fighting corruption in interrelated developing countries and promoting fiscal policy coordination among them: cooperation goes together with the acceptance of more corruption. It follows that poor-institution traps can be Pareto-improving.

Keywords: Corruption; Fiscal policy; International coordination (search for similar items in EconPapers)
JEL-codes: D7 F4 (search for similar items in EconPapers)
Date: 2011-01-19
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Working Paper: A note on poor-institution traps in international fiscal policy game (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-11-00015

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