Public investment under ethnic diversity and political uncertainty

Frank Bohn

No 200501, Working Papers from School of Economics, University College Dublin

Abstract: This paper addresses the puzzle that public services in some developing countries, especially in Africa, are poor despite large public expenditure. The intertemporal model here studies a government’s optimal choice between redistribution and public investment. Ethnic diversity and political uncertainty reinforce one another in producing myopic government behaviour which results in underinvestment. Above some critical value of political instability, it is optimal for the government not to invest at all.

Keywords: Political instability; Myopic behaviour; Public finance; Corruption; Political economy; Developing countries; Municipal services--Developing countries; Fiscal policy--Developing countries; Developing countries--Appropriations and expenditures; Political stability--Developing countries (search for similar items in EconPapers)
JEL-codes: E62 O23 (search for similar items in EconPapers)
Date: 2005-01
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http://hdl.handle.net/10197/1288 First version, 2005 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:200501

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