High-level rent-seeking and corruption in African regimes : theory and cases

Abstract

One explanation for Africa's failure to develop is the weakness of its public institutions. The authors consider one aspect of that weakness: rent-seeking and corruption at the top of government. Under the conditions of their model, and autocrat who seeks to maximize personal financial return favors an inefficiently large public sector and distorts other public sector priorities more than does an autocrat who seeks to maximize national income. However, if civil servants and public officials are also venal, the ruler will not favor so large a government. To show how African regimes operate, the authors present four cases illustrating issues raised by their theoretical model. Among their observations about the relationship between the motivations of top officials and policies to control corruption and other types of rent-seeking are these: A kleptocrat whose decision variable is the level of government intervention in the economy will select an excessive level of interventions, in which national income is less than optimal. Like all monopolies, the kleptocrat seeks productive efficiency except where inefficiency creates extra rents. Facing a kleptocrat, citizens prefer a smaller than optimal-sized government but get one that is too big. A kleptocrat may need to permit lower-level officials to share in corrupt gains thus introducing additional costs. He or she will then favor a smaller government than if subordinates could be perfectly controlled. Dropping the assumption of a single dimension of government intervention, the kleptocrat will favor a different mixture of tax, spending, and regulatory programs than will a benevolent autocrat. Dropping the assumption that rulers are writing on a clean slate, decisions to privatize or nationalize firms can differ across autocratic regimes. In particular, although kleptocrats will often be reluctant to privatize, they may in some cases support privatization that a benevolent ruler would oppose. Investment in countries with kleptocratic rules may have an overly short-run orientation. When rent-seeking at top levels is pervasive, both natural resources and foreign aid under state control may hamper, not encourage, growth.Decentralization,Economic Theory&Research,Environmental Economics&Policies,Payment Systems&Infrastructure,Labor Policies,Economic Theory&Research,National Governance,Environmental Economics&Policies,Governance Indicators,Health Economics&Finance