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Article Dans Une Revue International Journal of Economic Theory Année : 2022

Wheels and cycles: Suboptimality and volatility of corrupted economies

Résumé

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 into 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 economy. We compare the centralized and the decentralized solutions in the short and long run.
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Dates et versions

hal-03982895 , version 1 (15-11-2023)

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Stefano Bosi, David Desmarchelier, Thai Ha-Huy. Wheels and cycles: Suboptimality and volatility of corrupted economies. International Journal of Economic Theory, 2022, 18 (4), pp.440-460. ⟨10.1111/ijet.12323⟩. ⟨hal-03982895⟩
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