Corrupt local governments as resource farmers: The helping hand and the grabbing hand

In our model, the central government sets the tax rate and its share of revenue, while local governments maximize their private benefits, by engaging in two classes of activities. The first one consists of providing public goods which help firms to make more profit, thus enlarging the tax base. The...

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Bibliographic Details
Published in:	European Journal of Political Economy Vol. 22; no. 1; pp. 115 - 138
Main Authors:	Dalgic, Engin, Long, Ngo Van
Format:	Journal Article
Language:	English
Published:	Elsevier B.V 01-03-2006 Elsevier
Series:	European Journal of Political Economy
Subjects:	Corruption Economic growth Economic models Governance Growth Local Government Mathematical methods Political corruption Political Economy Poverty Poverty trap Public goods Revenue Sharing Tax share Taxation Tax share Corruption H41 Governance Growth Poverty trap
Online Access:	Get full text
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Summary:	In our model, the central government sets the tax rate and its share of revenue, while local governments maximize their private benefits, by engaging in two classes of activities. The first one consists of providing public goods which help firms to make more profit, thus enlarging the tax base. The second one consists of extortionary activities. We show that given any initial capital stock, there are corresponding threshold levels of transparency of governance, tenure length, and local government tax share, above which the economy will grow without bound, and below which it will fall into a poverty trap.
Bibliography:	ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23 ObjectType-Article-1 ObjectType-Feature-2
ISSN:	0176-2680 1873-5703
DOI:	10.1016/j.ejpoleco.2005.07.001