Bureaucratic corruption and macroeconomic performance

The objective of this paper is to analyze the welfare impact of corrupt bureaucratic behavior within the framework of a growth model. This allows to disentangle the interaction between static and dynamic bureaucratic efficiency. The economy is described by the following conditions: (i) The bureaucracy determines the provision of an input to individual production. This input might be congested. (ii) There are distortionary and non--distortionary taxes to finance the public input. Corruption is introduced as the bureaucrat maximizes its own utility at the cost of the utility of the individuals. (iii) The tax system is exogenous to the bureaucracy and might be interpreted as attempt to discipline the bureaucracy as argued within the Leviathan models. (iv) The bureaucracy maximizes the available budget. As the formal frame is a dynamic model the budget may be maximized either in the short, intermediate or the long run. It turns out that there is a trade--off between short--run and long--run budget that is crucially influenced by the design of the tax system and the bureaucratic preferences but not by congestion. The feature of congestion gains importance with respect to the welfare implications of corrupt bureaucratic behavior