On the cost of opportunistic behavior in the public sector: A General-Equilibrium approach

Aleksandar Vasilev

EconStor Open Access Articles and Book Chapters, 2016

Abstract: This paper studies the wasteful effect of bureaucracy on the economy by addressing the link between opportunistic behavior of government bureaucrats and the public sector wage bill. In particular, public officials are modeled as individuals competing for a larger share of those public funds. A simple extraction technology in the government administration is introduced in a standard Real-Business-Cycle (RBC) setup augmented with detailed public sector. The model is calibrated to German data for the period 1970-2007. The main findings are: (i) the model performs well vis-a-vis the data; (ii) Due to the existence of a significant public sector wage premium and the high public sector employment, a substantial amount of working time is spent in opportunistic activities, which in turn leads to significant losses in terms of output; (iii) The model-based loss measures obtained for the EU-12 countries are highly-correlated to indices of bureaucratic inefficiency.

Keywords: rent-seeking; opportunism; public employment; government wages (search for similar items in EconPapers)
JEL-codes: E32 E62 E69 J45 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: On the Cost of Opportunistic Behavior in the Public Sector: A General-Equilibrium Approach (2017)
Working Paper: On the cost of opportunistic behavior in the public sector: A General-Equilibrium approach (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:146629

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