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Human Capital and Corruption: A microeconomic model of the bribes market with democratic contestability

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Listed:
  • Pedro Vieira

    (Faculty õf Economics, University of Oporto)

  • Aurora Teixeira

    (Faculty of Economics, University of Oporto)

Abstract

To overcome market failures society creates common laws that stimulate or penalize individual actions, the enforcement of which depends on the actions of public authorities who may be susceptible to corruption. We model this behaviour for an autocracy versus a democracy, using a microeconomic framework. We assume that in an autocracy rulers have a monopoly over the bribes market, whereas in a democracy conflicting groups compete in the bribes market. The models constructed produce results that are compatible with the well-known stylized facts, namely that (1) in a democracy the level of corruption is lower than in an autocracy, although still positive, that (2) in environments where the level of human capital is higher, regimes are closer to democracies and the level of corruption is lower, and that (3) the level of corruption is higher in more regulated economies.

Suggested Citation

  • Pedro Vieira & Aurora Teixeira, 2006. "Human Capital and Corruption: A microeconomic model of the bribes market with democratic contestability," Notas Económicas, Faculty of Economics, University of Coimbra, issue 23, pages 72-82, June.
    • Handle: RePEc:gmf:journl:y:2006:i:23:p:72-82
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    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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