How corruption in government affects public welfare: A review of theory

Johann Lambsdorff

No 9, University of Göttingen Working Papers in Economics from University of Goettingen, Department of Economics

Abstract: The objectives of government are pivotal to understanding the diverse negative effects of corruption on public welfare. Corruption renders governments unable or unwilling to maximize welfare. In the first case, it distorts agents' decisions and limits the contractual space available to agents and the government, acting as a benevolent principal. In the second case, a corrupt principal creates allocative inefficiencies, cripples its credible commitment to effective policies, and opens the door to opportunism.

Keywords: Corruption; welfare; principal-agent-theory; rent-seeking; x-inefficiency; kleptocracy; opportunism (search for similar items in EconPapers)
JEL-codes: D61 D72 K4 (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (4)

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