Because of their more limited inequality and more comprehensive social welfare systems, many perceive average welfare to be higher in Scandinavian societies than in the United States. Why then does the United States not adopt Scandinavian-style institutions? More generally, in an interdependent...

Many developing countries have suffered under the personal rule of “kleptocrats”, who implement highly inefficient economic policies, expropriate the wealth of their citizens, and use the proceeds for their own glorification or consumption. We argue that the success of kleptocrats rests, in...

We consider an economy where property rights are necessary to ensure sufficient rewards to ex-ante investments. Because enforcement of property rights influences the ex-post distribution of rents, there is room for corruption. We characterize the optimal organization of society and the optimal...

Because government intervention transfers resources from one party to another, it creates room for corruption. As corruption often undermines the purpose of the intervention, governments will try to prevent it. They may create rents for bureaucrats, induce a misallocation of resources, and...

The authors consider an economy where contracts are necessary to encourage investments. Contract enforcement requires that a fraction of the agents work in the public sector and do not accept bribes. The authors find that (1) it may be optimal to allow some corruption and not enforce property...

Many developing countries have suffered under the personal rule of ‘kleptocrats’, who implement highly inefficient economic policies, expropriate the wealth of their citizens, and use the proceeds for their own glorification or consumption. The incidence of kleptocracy is a serious...

Many developing countries have suffered under the personal rule of kleptocrats, who implement highly inefficient economic policies, expropriate the wealth of their citizens, and use the proceeds for their own glorification or consumption. We argue that the success of kleptocrats rests, in part,...