Seminar by Dyotona Dasgupta (IGIDR)

Centre for Development Economics
Department of Economics
Delhi School of Economics

ANNOUNCE A SEMINAR

by

Venue:  Amex

Abstract:-
We provide an explanation for why electoral policies skew toward private transfers at the cost of public infrastructure through commitment asymmetry and corruption in public good provision. We further show how corruption shapes private economic behavior through expectations. When public infrastructure and private effort are complementary, corruption can depress forward-looking private initiative, even when agents are rational. We develop a model of electoral competition with two parties and a median voter. Each party can be of two types – corrupt or honest. Parties announce budget allocations between transfers and public goods. Transfers are credibly delivered, public-good funds are misappropriated by the corrupt type, if elected. The voter simultaneously votes and chooses effort for a private project. We characterize all pure strategy Perfect Bayesian Equilibria (PBE). No interesting separating PBE exists, and multiple pooling PBE exist; in any pooling equilibrium, the less corrupt party wins with certainty. Greater political competition, modeled as a narrowing of the gap between parties’ corruption probabilities, increases private transfers and dampens promised public good and optimal effort. When competition is intense, voter welfare is invariant to the winning party’s corruption probability and decreasing in that of the losing party. When competition is weak, welfare is invariant to the losing party’s corruption probability. If the winning party is significantly less (highly) corrupt, the entire (no) budget goes to promised public goods, welfare and effort fall (remain constant at the minimum) as the winning party becomes more corrupt. Ex post corruption decreases with competition..

All are cordially invited.

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