Year: 2014
Type: dissertation
Abstract: This thesis is composed of three distinct but related essays. The first essay \nstudies the role of the size of the economy in mitigating the impact of \npublic sector corruption on economic development. The analysis is based on \na dynamic general equilibrium model in which growth occurs endogenously \nthrough the invention and manufacture of new intermediate goods that are \nused in the production of output. Potential innovators decide to enter the \nmarket considering the fraction of future profits that may be lost to corruption. \nWe find that depending on the number of times bribes are demanded, \nthe size of the economy may be an important factor in determining the effects \nof corruption on innovation and economic growth. \nThe second essay presents an occupational choice model in which a household \ncan choose either formal or informal entrepreneurship or at the subsistence \nlivelihood. Credit market constraints and initial wealth conditions \n(bequest) determine an agent’s occupational choice. Corruption arises when \nbureaucrats exchange investment permits for bribes. Corruption worsens \ncredit market constraints. Equilibrium with corruption is characterised by \nan increase (decrease) in informal (formal) entrepreneurship and a decrease in \nformal entrepreneurship wealth. Since corruption-induced credit constrained \nhouseholds choose informal entrepreneurship as opposed to subsistence livelihood \nincome in the formal sector, the informal economy is shown to mitigate \nthe extent of income inequality. \nThe third essay explains the role of bureaucratic corruption in undermining \npublic service delivery, public finance, and economic development \nthrough incentivising tax evasion. The analysis is based on a dynamic general \nequilibrium model in which a taxable household observes the quality of \npublic services and decides whether or not to fulfil his tax obligation. Bureaucratic \ncorruption compromises the quality of public services such that a \ntaxable household develops incentives to evade tax payment. We show that \ncorruption-induced tax evasion increases the likelihood of a budget deficit, \nrenders tax payable increase counter-productive, and aggravates the negative \neffect of bureaucratic corruption on economic development.
Author: Ibrahim Mike Okumu
Language: English
Subfield: Sociology and Political Science
Field: Social Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1521248191