Work detail

Public Procurements as a Corrupting Sector in RBC Model

Author: Mgr. Michal Paulus
Year: 2012 - summer
Leaders: PhDr. Jaromír Baxa Ph.D.
Consultants:
Work type: Economic Theory
Masters
Language: English
Pages: 117
Awards and prizes:
Link:
Abstract: The aim of the thesis is to create a RBC model incorporating corrupting sector. The
thesis contributes to the few existing DSGE models with corruption by introducing
the corrupting sector into the sector of firms and political parties which is regarded
as a sector of public procurements where firms bribe politicians for gaining public
tenders. This setting is new and is supposed to catch better the phenomenon
of political corruption. The model predicts that all shocks that positively affect
the economy motivate firms to invest more into the bribes and vice versa. The
increase of the overall level of corruption stimulates economy but is leading an
economy to the instability. The model also examines the effect of various forms
of fiscal spending in the households’ utility function. The model exhibits several
non-intuitive results (too high portion of stolen money by firms, stimulation of
the economic performance caused by higher corruption and negative holding of
government bonds) that should be solved in next research.

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