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A note of poor-institution traps in international fiscal policy games

Author

Listed:
  • Pierre Faure

    (Larefi)

Abstract

This note explores the link between the effort level to strengthen institutional quality and the nature of the fiscal policy game among interdependent economies plagued by corruption. Every country has a lower incentive to improve public governance when the effort made abroad to remedy institutional deficiencies becomes weaker. More importantly, the model highlights a possible trade-off between fighting corruption in interrelated developing countries and promoting fiscal policy coordination among them: cooperation goes together with the acceptance of more corruption. It follows that poor-institution traps can be Pareto-improving.

Suggested Citation

  • Pierre Faure, 2011. "A note of poor-institution traps in international fiscal policy games," Larefi Working Papers 201110, Larefi, Université Bordeaux 4.
    • Handle: RePEc:laf:wpaper:201110
    as

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    File URL: ftp://ftp.u-bordeaux4.fr/pub/RePEc/laf/cahiers/2011/CR11_EFI-10.pdf
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    More about this item

    Keywords

    Corruption; Fiscal policy; International coordination;
    All these keywords.

    JEL classification:

    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • D7 - Microeconomics - - Analysis of Collective Decision-Making

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