Public Goods, Corruption, and the Political Resource Curse

• In Event: Resources, Budgets, and Regimes

Abstract

Does corruption increase or decrease with public goods spending? I develop a model of public good provision by a rent-seeking political agent who can obtain rents by stealing government revenues and/or extracting bribes from the private sector in exchange for public goods. I show there is a threshold level of revenues below which the agent cannot steal, and therefore can obtain rents only from bribes. Higher revenues unambiguously increase public spending because nothing is stolen, and can decrease corruption (in the form of bribes) if the marginal social value of the public goods from which the bribes are extracted is sufficiently high. Above this threshold, the agent can increase her rents by stealing revenues. Revenues have no effect on public spending, but unambiguously increases corruption (in the form of theft). Hence, a political resource curse always emerges when resources provide politicians with 'too much' revenues - that is, beyond a threshold level that she could credibly spend on public goods.

Author

• Desiree Desierto, University of Rochester