DP3668 | Transparency Gloves for Grabbing Hands? Politics and (Mis)Governance

Publication Date

20/12/2002

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Abstract

Employing the canonical political agency model, this Paper studies the incentives of the government to provide high-quality services by reducing corruption. Acting as a principal in a moral hazard framework, the public disciplines the incumbent by replacing him if the generated output is unsatisfactorily low. The implications of the model indicate the importance of transparency, of the media, and of political contestability for taming corruption. The existing empirical evidence is shown to broadly support these conclusions.