Bureaucratic Corruption and Endogenous Economic Growth

TLDR

Bureaucratic corruption varies widely across countries and regimes, yet little theory or data link it to government and growth. The study aims to fill this gap by modeling the relationship between corruption, government, and economic growth. The authors construct equilibrium models of endogenous growth, deriving balanced growth as a trade‑off between human‑capital accumulation, which fuels growth, and political‑capital accumulation, which sustains bureaucratic power, and examine how investment in these capitals shapes long‑term growth under different political regimes. Empirical tests confirm several propositions derived from the models.

Abstract

There Appears to be significant diversity in the incidence of bureaucratic corruption across countries at different stages of economic development and under different political and economic regimes. Little theoretical or empirical analysis has been offered, however, on the link between corruption, government, and growth. The paper attempts to fill the void through equilibrium models of endogenous growth. "balanced growth" is derived as a balancing act between accumulating human capital, which engenders growth, and accumulating political capital, which mainly assures bureaucratic power. The analysis focuses on the interplay between investment in these two types of capital and its implications for long‐term growth under alternative political regimes. Some propositions are tested and confirmed empirically.