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The Dynamics of Corruption and Unemployment in a Growth Model with Heterogeneous Labour

Research output: Working paper

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Abstract

This paper presents an overlapping generations growth model with heterogeneous labour, endogenous unemployment, and public sector corruption. Unlike most previous studies, the model does not separate public officials and private individuals into two distinct groups. Instead, taking up bureaucratic appointment as a public servant is modelled as an occupational choice, which then allows for the endogenous determination of the proportion of public o¢fficials, the share of corrupt officials among them, and the public investment efficiency of the economy within the dynamic system. Parameterised for Nigeria, the dynamics of endogenous corruption and unemployment,
as well as their policy tradeoff, are studied using numerical policy experiments based on relevant themes in the country, which include public sector downsizing and social intervention schemes.