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A Theory of the Corrupt Keynesian

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  • Aidt, T.S.
  • Dutta, J.

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 .nd that corruption is procyclical 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

  • Aidt, T.S. & Dutta, J., 2008. "A Theory of the Corrupt Keynesian," Cambridge Working Papers in Economics 0861, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:0861
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    References listed on IDEAS

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    1. 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.
    2. 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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    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

    Corruption; entry regulation; performance voting; business cycles.;
    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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