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| Pierre Faure |
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| ''A note on poor-institution traps in international fiscal policy games'' |
| ( 2011, Vol. 31 No.1 ) |
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| 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. |
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| Keywords: Corruption; Fiscal policy; International coordination |
JEL: F4 - Macroeconomic Aspects of International Trade and Finance: General
D7 - Analysis of Collective Decision-Making: General |
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| Manuscript Received : Jan 09 2011 | | Manuscript Accepted : Jan 19 2011 |
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