What Transparency Can Do When Incentives Fail: An Analysis of Rent Capture

June 1, 2006

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Elisabeth Paul, and Era Dabla-Norris. What Transparency Can Do When Incentives Fail: An Analysis of Rent Capture, (USA: International Monetary Fund, 2006) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes the pervasiveness and persistence of rent seeking, misgovernance, and public sector inefficiency in many developing and transition economies. We formalize evidence from country experiences and empirical studies into a stylized analytical framework that reflects realistic constraints faced in these countries. Our work departs from the standard economic literature by assuming that (i) the relationship between the government and its population is regulated through an implicit social consensus; (ii) traditional incentives (in the form of public expenditure controls, sanctions, or monetary incentives to perform) are, for various reasons, ineffective in many of these countries; and (iii) the persistence of high corruption reflects a very stable equilibrium, which in turn reflects the fact that several constraints are simultaneously binding. We argue that, when traditional incentives fail, transparency-information provision and disclosure, together with the means to use it-by relaxing different constraints, can contribute to improving public outcomes.

Subject: Civil service, Corruption, Population and demographics, Tax incentives, Wages

Keywords: Agency problem, Optimal contract, Public service, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/146
Stock No:

WPIEA2006146
ISBN:

9781451864069
ISSN:

1018-5941

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