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Benefit sharing: An incentive mechanism for social control of government expenditure

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  • Bugarin, Mauricio
  • Vieira, Laercio

Abstract

The present paper analyzes the incentives individual members of society face to contribute to a nation's efforts in controlling corruption. A Principal-Agent model is constructed, leading to the following results. First, although individual agents do have an interest in devoting a portion of their resources to the nation's control effort, the opportunity cost of the effort and a free rider problem blocks the spontaneous provision of individual support to corruption control. Second, to cope with those incentives, a new welfare improving mechanism is proposed, which aligns individual incentives with those of society at no extra cost to the government.

Suggested Citation

  • Bugarin, Mauricio & Vieira, Laercio, 2008. "Benefit sharing: An incentive mechanism for social control of government expenditure," The Quarterly Review of Economics and Finance, Elsevier, vol. 48(4), pages 673-690, November.
    • Handle: RePEc:eee:quaeco:v:48:y:2008:i:4:p:673-690
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    References listed on IDEAS

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    1. Gomes, Victor & Bugarin, Mirta N. S. & Ellery-Jr, Roberto, 2005. "Long-run Implications of the Brazilian Capital Stock and Income Estimates," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 25(1), May.
    2. Mohsin Habib & Leon Zurawicki, 2002. "Corruption and Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(2), pages 291-307, June.
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    4. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 681-712.
    5. Balla, Steven J., 1998. "Administrative Procedures and Political Control of the Bureaucracy," American Political Science Review, Cambridge University Press, vol. 92(3), pages 663-673, September.
    6. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-141, January.
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