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Corrupt local governments as resource farmers: The helping hand and the grabbing hand

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  • Dalgic, Engin
  • Long, Ngo Van

Abstract

We study the role of tax share and transparency of governance on growth and stagnation. A local government maximizes its private benefits using two activities. The first one consists of providing local public goods that help local firms to increase profits, thus enlarging tax revenue. The second one consists of extortion. We show that there is a threshold level of local government tax share, and a threshold level of transparency. Below these thresholds, the economy will stagnate and above them, the economy will achieve perpetual growth.
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  • Dalgic, Engin & Long, Ngo Van, 2006. "Corrupt local governments as resource farmers: The helping hand and the grabbing hand," European Journal of Political Economy, Elsevier, vol. 22(1), pages 115-138, March.
    • Handle: RePEc:eee:poleco:v:22:y:2006:i:1:p:115-138
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    1. R. Rees & John Komlos & Ngo V. Long & Ulrich Woitek, 2003. "Optimal food allocation in a slave economy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 16(1), pages 21-36, February.
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    10. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
    11. Kemp, Murray C & Long, Ngo Van & Shimomura, Koji, 1993. "Cyclical and Noncyclical Redistributive Taxation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(2), pages 415-429, May.
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    Cited by:

    1. Gulnaz Sharafutdinova & Jevgenijs Steinbuks, 2017. "Governors matter," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 25(3), pages 471-493, July.
    2. Vincent Bignon & Rui Esteves & Alfonso Herranz-Loncán, 2015. "Big push or big grab? Railways, government activism, and export growth in Latin America, 1865–1913," Economic History Review, Economic History Society, vol. 68(4), pages 1277-1305, November.
    3. Thomas Aronsson & David Granlund, 2017. "Federal subsidization of state expenditure to reduce political budget cycles," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(3), pages 536-545, June.
    4. Ngo Van Long & Bodhisattva Sengupta, 2008. "Yardstick Competition, Corruption, and Electoral Incentives," CESifo Working Paper Series 2345, CESifo.
    5. Anton Granik & Francesco Saraceno, 2012. "Institutions and growth: A simplied theory of decentralization and corruption," Documents de Travail de l'OFCE 2012-21, Observatoire Francais des Conjonctures Economiques (OFCE).
    6. repec:hal:wpspec:info:hdl:2441/53r60a8s3kup1vc9k2cag6dp8 is not listed on IDEAS
    7. Nobuhiro Mizuno & Katsuyuki Naito & Ryosuke Okazawa, 2017. "Inequality, extractive institutions, and growth in nondemocratic regimes," Public Choice, Springer, vol. 170(1), pages 115-142, January.
    8. repec:spo:wpecon:info:hdl:2441/53r60a8s3kup1vc9k2cag6dp8 is not listed on IDEAS
    9. repec:elg:eechap:15325_22 is not listed on IDEAS
    10. Anton Granik & Francesco Saraceno, 2012. "Institutions and growth : a simplified theory of decentralization and corruption," SciencePo Working papers Main hal-03461200, HAL.
    11. Anton Granik & Francesco Saraceno, 2012. "Institutions and growth : a simplified theory of decentralization and corruption," Working Papers hal-03461200, HAL.
    12. Frye, Timothy M. & Iwasaki, Ichiro, 2011. "Government directors and business–state relations in Russia," European Journal of Political Economy, Elsevier, vol. 27(4), pages 642-658.
    13. Alexander Libman, 2012. "Democracy, size of bureaucracy, and economic growth: evidence from Russian regions," Empirical Economics, Springer, vol. 43(3), pages 1321-1352, December.
    14. repec:spo:wpmain:info:hdl:2441/53r60a8s3kup1vc9k2cag6dp8 is not listed on IDEAS
    15. repec:hal:spmain:info:hdl:2441/53r60a8s3kup1vc9k2cag6dp8 is not listed on IDEAS

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