What effects on economic efficiency

What effects on economic efficiency

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ’’’ is an UNSTABLE equilibrium where people are split between rent- seekers and produces; but an increase in individuals beyond N’’’ raises returns to rent seeking above those of production and will encourage more and more rent seekers until N=N’’ Institutional framework tells you if you move to producers or rent- seekers at this unstable equilibrium. There are constant returns to scale for rent- seekers (characterized by increasing returns or at minimum constant returns) Subsistence is where you don’t produce anything beyond your costs OR: Does development ! cause corruption Under- development or stagnation produces corruption Rationale: lack of economic progress may encourage corruption among political officials, Poverty encourages rent- seeking behavior Poor human capital encourages rent- seeking behavior Something about the developmental process creates opportunities for corruption Evidence? Although richer countries have less corruption as always, the causality is unclear Measure of corruption and other institutional- quality measures tend to ’cluster” together Sources of Corruption:...
View Full Document

This document was uploaded on 03/28/2014 for the course INAF 252 at Georgetown.

Ask a homework question - tutors are online