Centre for Economic Research Working Paper Series No. WP04/13
University College Dublin, Department of Economics, Dublin
This paper studies a policymaker’s optimal choice between redistribution and efficient public investment. Under political instability, there is myopic government behavior which results in underinvestment. Above some critical value of political instability, it is optimal not to invest at all. This finding also suggests that it may be rational for governments to refrain from anti-corruption investment, even if they are not rent-seeking themselves.
political instability myopic behavior public investment corruption political economy transition and developing countries