Benefit sharing: An incentive mechanism for social control of government expenditure

Mauricio Bugarin and Laercio Vieira

The Quarterly Review of Economics and Finance, 2008, vol. 48, issue 4, 673-690

Abstract: The present paper analyzes the incentives individual members of society face to contribute to a nation's efforts in controlling corruption. A Principal-Agent model is constructed, leading to the following results. First, although individual agents do have an interest in devoting a portion of their resources to the nation's control effort, the opportunity cost of the effort and a free rider problem blocks the spontaneous provision of individual support to corruption control. Second, to cope with those incentives, a new welfare improving mechanism is proposed, which aligns individual incentives with those of society at no extra cost to the government.

Keywords: Public; finance; Social; control; Governmental; control; Contract; theory; Incentives (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:48:y:2008:i:4:p:673-690

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