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Pierre Faure
 
''A note on poor-institution traps in international fiscal policy games''
( 2011, Vol. 31 No.1 )
 
 
This note explores the link between the effort level to strengthen institutional quality and the nature of the fiscal policy game among interdependent economies plagued by corruption. Every country has a lower incentive to improve public governance when the effort made abroad to remedy institutional deficiencies becomes weaker. More importantly, the model highlights a possible trade-off between fighting corruption in interrelated developing countries and promoting fiscal policy coordination among them: cooperation goes together with the acceptance of more corruption. It follows that poor-institution traps can be Pareto-improving.
 
 
Keywords: Corruption; Fiscal policy; International coordination
JEL: F4 - Macroeconomic Aspects of International Trade and Finance: General
D7 - Analysis of Collective Decision-Making: General
 
Manuscript Received : Jan 09 2011 Manuscript Accepted : Jan 19 2011

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