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Wheels an cycles: (sub)optimality and volatility of corrupted economies

Author

Listed:
  • Stefano BOSI

    (Université Paris-Saclay, EPEE)

  • David DESMARCHELIER

    (Université de Lorraine, BETA)

  • Thai HA-HUY

    (Université Paris-Saclay, EPEE)

Abstract

We consider a simple economy where production depends on labor supply and social capital. Networking increases the social capital ("greases the wheel") but also the corruption level ("sands the wheel"). Corruption is a negative productive externality. We compare the market economy, Where the negative externality is not taken in account by individuals, with a centralized economy, where the planner internalizes the negative effect. We highlight the possible existence of cycles in the market economy and optimal cycles in the planned one. We compare the centralized and the decentralized solutions in the short and in the long run.

Suggested Citation

  • Stefano BOSI & David DESMARCHELIER & Thai HA-HUY, 2019. "Wheels an cycles: (sub)optimality and volatility of corrupted economies," Documents de recherche 19-04, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
    • Handle: RePEc:eve:wpaper:19-04
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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