Yardstick Competition, Corruption, and Electoral Incentives
21 Pages Posted: 8 Jul 2008
Date Written: July 3, 2008
Abstract
This paper investigates the relationship between electoral incentives, institutions and corruption. We assume that voters use a yardstick criterion. The incumbent provides a public good and extracts rent, which are financed by imposing a distortionary tax. We demonstrate the possibility that yardstick competition itself fails to restrict rent seeking. We complement the static setting with a dynamic scenario where each incumbent politician faces an election after a finite, fixed term. Under relative performance evaluation, dynamic incentives impose more restriction on rent appropriation in comparison to the static case.
Keywords: yardstick competition, rent-seeking, public good, electoral incentives
JEL Classification: H11, H73, H77
Suggested Citation: Suggested Citation