This paper presents an analysis of the effect of bureaucratic corruption on economic growth through a public ?nance transmission channel. At the theoretical level, we develop a simple dynamic general equilibrium model in which fi?nancial intermediaries make portfolio decisions on behalf of...

We present an overlapping generations model in which aspirationalagents face uncertainty about the returns to human capital. Investment in human capital requires external funding, implying a probability of bankruptcy that is greater the lower the human capital endowment of an agent. We show that...

We study the relationship between the underground economy and financial development in a model of tax evasion and bank intermediation. Agents with heterogenous skills seek loans in order to undertake risky investment projects. Asymmetric information between borrowers and lenders implies a menu...

Empirical observation suggests that not all countries of the world have suffered as a result of widespread corruption. Whilst many countries have undoubtedly been damaged considerably, others appear to have coped well - in some cases, very well - with the problem. The analysis that follows seeks...

We develop a model of occupational choice in which private agents have the option of either working in some costless, but low-yielding, activity (subsistence production), or undertaking a costly, but potentially more rewarding, venture (entrepreneurship). In the case of the latter, loans must be...

Empirical evidence shows that not all countries with high levels of corruption have su¤ered poor growth performance. Bad quality governance has clearly been much less damaging (if at all) in some economies than in others. Why this is so is a question that has largely been ignored, and the...