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A Theory Of The Corrupt Keynesian

In: New And Enduring Themes In Development Economics

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  • TOKE S. AIDT

    (Faculty of Economics and Jesus College, University of Cambridge, Cambridge CB3 9DD, United Kingdom)

  • JAYASRI DUTTA

    (Department of Economics, University of Birmingham, UK)

Abstract

We evaluate the impact of real business cycle shocks on corruption and economic policy in a model of entry regulation in a representative democracy. We find that corruption is pro-cyclical and regulation policy is counter-cyclical. Corrupt politicians engage in excessive stabilization of aggregate fluctuations and behave as if they were Keynesian. We also find that business cycle shocks can induce political instability with politicians losing office in recessions.

Suggested Citation

  • Toke S. Aidt & Jayasri Dutta, 2009. "A Theory Of The Corrupt Keynesian," World Scientific Book Chapters, in: Bhaskar Dutta & Tridip Ray & E Somanathan (ed.), New And Enduring Themes In Development Economics, chapter 4, pages 93-111, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812839428_0004
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    1. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 1-37.
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    3. Aidt, Toke & Dutta, Jayasri & Sena, Vania, 2008. "Governance regimes, corruption and growth: Theory and evidence," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 195-220, June.
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    Cited by:

    1. Frank Bohn, 2018. "Political cycles: Beyond rational expectations," PLOS ONE, Public Library of Science, vol. 13(10), pages 1-23, October.

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    More about this item

    Keywords

    Development Economics; Happiness; Well-Being; Political Economy; Economic of Labour; Agricultural Economics;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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