Wheels and cycles: Suboptimality and volatility of corrupted economies

Stefano Bosi (), David Desmarchelier () and Thai Ha-Huy
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Stefano Bosi: EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay, Université Paris-Saclay
David Desmarchelier: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: We consider a simple economy where production depends on labor supply and social capital. Networking increases the social capital ("greases the wheel") but also the corruption level ("sands the wheel"). Corruption is a negative productive externality. We compare the market economy, where the negative externality is not taken into account by individuals, with a centralized economy, where the planner internalizes the negative effect. We highlight the possible existence of cycles in the market economy and optimal cycles in the planned economy. We compare the centralized and the decentralized solutions in the short and long run.

Keywords: Corruption; Optimal cycles; Ramsey model (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-dge
Note: View the original document on HAL open archive server: https://hal.univ-lorraine.fr/hal-03982895
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Published in International Journal of Economic Theory, 2022, 18 (4), pp.440-460. ⟨10.1111/ijet.12323⟩

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Related works:
Journal Article: Wheels and cycles: Suboptimality and volatility of corrupted economies (2022)
Working Paper: Wheels an cycles: (sub)optimality and volatility of corrupted economies (2019)
Working Paper: Wheels and cycles: (sub)optimality and volatility of corrupted economies (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03982895

DOI: 10.1111/ijet.12323

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