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Public Co-financing of Private Sector's Investments: Subsidiarity and Corruption

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  • Fedeli, Silvia
  • Forte, Francesco

Abstract

The literature on corruption makes unclear predictions on the relations between subsidiarity principle, according to which public decisions should be done at the lower level government possible, and corruption of public officials. In this paper, we compare two alternative regimes, centralised vs. decentralised, for the public co-financing of private projects. We show that, in the absence of corruption, the two regimes give the same results. Borrowing from the Chamberlin's analysis of monopolistic competition and from the rent-seeking literature, we introduce corruption in the model as a selling cost for the private suppliers. We show that a centralized regime causes higher corruption levels because of the higher number of private suppliers of competing projects. As a result, a central government tends to have a higher level of public capital expenditure than two (equally corruptible) regional governments. Copyright 2003 by Kluwer Academic Publishers

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  • Fedeli, Silvia & Forte, Francesco, 2003. "Public Co-financing of Private Sector's Investments: Subsidiarity and Corruption," Public Choice, Springer, vol. 116(1-2), pages 109-145, July.
    • Handle: RePEc:kap:pubcho:v:116:y:2003:i:1-2:p:109-45
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    Cited by:

    1. Silvia Fedeli, 2022. "Francesco Forte: an economist across boundaries," Public Choice, Springer, vol. 190(3), pages 273-280, March.
    2. Jihène Sbaouelgi, 2019. "The Impact Of Corruption On Economic Growth In Mena Region," Romanian Economic Business Review, Romanian-American University, vol. 14(2), pages 40-54, June.
    3. Michele Caputo & Francesco Forte & Michela Mantovani, 2014. "Long-run and shorter-run criminal cycles in the public economics of public bads," Chapters, in: Francesco Forte & Ram Mudambi & Pietro Maria Navarra (ed.), A Handbook of Alternative Theories of Public Economics, chapter 22, pages 503-542, Edward Elgar Publishing.
    4. Mtiraoui, Abderraouf, 2015. "Corruption et développement économique: Application aux secteurs de l’éducation et de la santé dans la zone MENA [Corruption and Economic Development: Application to the sectors of education and he," MPRA Paper 64306, University Library of Munich, Germany.

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