Growth, public investment and corruption with failing institutions

David de la Croix and Clara Delavallade

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: Corruption is thought to prevent poor countries from catching up with richer ones. We analyze one channel through which corruption hampers growth : public investment can be distorted in favor of specific types of spending for which rent-seeking is easier and better concealed. To study this distorsion, we propose a dynamic model where households vote for the composition of public spending, subject to an incentive constraint reflecting individuals' choice between productive activity and rent-seeking. In equilibrium, the structure of public investment is determined by the predatory technology and the distribution of political power. Among different regimes, the model shows a possible scenario of distortion without corruption in which there is no effective corruption but the possibility of corruption still distorts the allocation of public investment. We test the implications of the model on a set of countries using a two-stage least squares estimation. We find that developing countries with high predatory technology invest more in housing and physical capital in comparison with health and education. The reverse is true for developed countries.

Keywords: political power; Public investment; corruption; optimal growth (search for similar items in EconPapers)
Date: 2008-05
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00129741v2
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Published in 2008

Downloads: (external link)
https://shs.hal.science/halshs-00129741v2/document (application/pdf)

Related works:
Journal Article: Growth, public investment and corruption with failing institutions (2009)
Working Paper: Growth, public investment and corruption with failing institutions (2009)
Working Paper: Growth, public investment and corruption with failing institutions (2008)
Working Paper: Growth, public investment and corruption with failing institutions (2008)
Working Paper: Growth, Public Investment and Corruption with Failing Institutions (2007)
Working Paper: Growth, public investment and corruption with failing institutions (2006)
Working Paper: Growth, public investment and corruption with failing institutions (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00129741

Access Statistics for this paper

More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
Bibliographic data for series maintained by CCSD ().