Endogenous corruption in a neoclassical growth model

Abstract

The following paper presents a simple neoclassical growth model where corruption is an endogenous result of competition between a public agent and a private agent. The model provides a simple theoretical framework in which the level of corruption as well as the effects of corruption on income, consumption, and growth are identifiable. Bureaucratic red-tape is then added to the model. The results suggest that, a priori, corruption is neither efficiency enhancing nor efficiency detracting with respect to growth but always results in some income redistribution.