Working Paper


Morgan Kelly



corruption mathematical models international trade exogenous growth capital institutions economic development organizational behavior growth model

Developing rotten institutions (2005)

Abstract This paper models corruption as optimal parasitism in organizations whereteams of agents are weakly restrained by principals. Each agent takes on partof the role of principal, choosing how much to invest in policing to repress corruption in others and how rapaciously to act when unpoliced opportunities arise. This simple model incorporates most of the factors stressed in empirical analyses of corruption, and gives rise to a wide variety of equilibria. Allow income to co-evolve with corruption, we show how adding corruption to a textbook exogenous growth model leads to a Lucas paradox. Whenincome and corruption affect each other suffciently strongly, economies convergeto two corner equilibria despite diminishing returns to capital: a rich,clean corner and a poor, corrupt one; a pattern that appears to characterize international data.This paper is part of the International Trade and Investment Programme of the Geary Institute at UCD.
Collections Ireland -> University College Dublin -> Economics Working Papers & Policy Papers
Ireland -> University College Dublin -> School of Economics
Ireland -> University College Dublin -> College of Social Sciences and Law

Full list of authors on original publication

Morgan Kelly

Experts in our system

Morgan Kelly
University College Dublin
Total Publications: 37