Karl Ove Moene

How corruption may corrupt

Abstract The incidence of corruption appears to vary strongly across societies even for comparable activities. The model highlights how the profitability of bureaucratic corruption may be related to its frequency and points toward a few mechanisms that can be used in explaining the stylized facts of varying incidence of corruption. There might be multiple self-fulfilling equilibria levels of corruption even when both supply and demand of corrupt acts are considered.

Cursed by Resources or Institutions

Natural resource abundant countries constitute both growth losers and growth winners, and the main difference between the success cases and the cases of failure lays in the quality of institutions. With grabber friendly institutions more natural resources push aggregate income down, while with producer friendly institutions more natural resources increase income. Such a theory finds strong support in data. A key question we also discuss is if resources in addition alter the quality of institutions. When that is the case, countries with bad institutions suffer a double resource curse - as the deterioration of institutions strenghtens the negative effect of more natural resources.

Earnings Inequality and Welfare Spending: A Disaggregated Analysis

The welfare state is generally viewed as either providing redistribution from rich to poor or as providing publicly financed insurance. Both views are incomplete. Welfare policies provide both insurance and redistribution in varying amounts, depending on the design of the policy. The authors explore the political consequences of the mix of redistribution and insurance in the context of studying the impact of income inequality on expenditures in different categories of welfare spending in advanced industrial societies from 1980 to 1995. They find that spending on pensions, health care, family benefits, poverty alleviation and housing subsidies is largely uncorrelated with income inequality, but that spending on income replacement programs such as unemployment insurance, sickness pay, occupational illness and disability are significantly higher in countries with more egalitarian income distributions. They show that this pattern is exactly what a theory of political support for redistributive social insurance programs would predict.

Controlling Fiscal Corruption

This paper examines the issue of controlling fiscal corruption by providing incentives to fiscal officers. First, a case study of a successful attack on corruption is presented that shows the importance of attending to the conditions of service of fiscal officers. Second, a model is developed drawing on the conclusions of the case study that shows their consistency with optimization behavior. It confirms that simply providing bonuses is not enough. Corruption at higher levels of management has to be contained so as to allow bonuses to become more effective, and thereby to initiate a virtuous circle.

Unions' Threats and Wage Determination

This paper considers local wage bargaining as a sequential game and focus es on how different rules of the game affect employment and equilibri um payment to workers and employers. Work-to-rule and other go-slow t hreats lead to low employment, while strike threats lead to high empl oyment. An increase in the bargaining power of the union induces high er or unchanged equilibrium employment in the strike-threat case, whi le employment is reduced in the slow-down case. Finally, if all kinds of industrial actions are legal, only one is credible. Which type de pends on the parameters of the model. Copyright 1988 by Royal Economic Society.

Types of bureaucratic interaction

Abstract A taxonomy of relationships between a public bureau and its sponsoring institution is modelled within a simple follower-leader framework. Various assumptions are made with respect to who makes the decision about the bureaucratic activity level and with respect to cost information. The role played by budgetary slack is emphasized. Deviations from the socially optimal bureau are identified, but no general support is found for the view that bureaus tend to become too big.

Trade union behaviour, pay-bargaining, and economic performance

Part 1 Can political models predict union behaviour?, Robert J. Flanagan: trade unions - models and institutions classical voting models and union behaviour the descriptive power of the median voter model institutional structure and voting outcomes union leaders and union members a stocktaking comment, Alistair Ulph comment, Assar Lindbeck. Part 2 Bargaining structure and economic performance, Karl Ove Moene et al: wage demands by unions and employers bargaining models of wage-setting conflicts over the level of bargaining comment, Assar Lindbeck comment, Lars Calmfors.

A reformulation of the Harris-Todaro mechanism with endogenous wages

Abstract Wages in the modern sector are set by firms to deter shirking, while urban unemployment is a process of waiting for modern sector jobs. Rural urban migration equalizes rural incomes to the expected incomes of those in the urban unemployment pool.

Mineral Rents and Social Development in Norway

Norway is often referred to as the prime example of a country that has achieved high growth and low income inequality despite its vast natural resources. This contrasts sharply with many other resource abundant countries, which raises the questions why Norway has succeeded while many other resource abundant countries have not. That is the topic of this paper. To make progress we first need to find out along which dimensions Norway differs from resource abundant countries with a less favorable development. Thereafter we turn to a more detailed description and investigation of the policies adopted in Norway, and discuss if there are lessons to be learned for other resource abundant countries.

Social democracy as a development strategy

Social democracy, it is often said, is nice but pricey. Whatever its merits in the rich countries of Western Europe, social democracy is frequently dismissed as an infeasible model for developing countries. Based on generosity towards the poor and protection against market competition, the argument goes, social democracy is only possible in consensual, homogeneous and affluent societies with an extraordinary commitment to equality. In third world countries that are conflict-ridden, heterogeneous and poor, does the social democracy have any relevance? In this article we offer a more agnostic view of the feasibility of the social democratic model of development in the third world. First, we argue that consensus, homogeneity, and affluence are products of the social democratic model, not prerequisites. Second, we claim that the central social democratic policy as a development model was the policy of wage compression attained through highly centralized wage-setting institutions. Third, we argue that the economics benefits of wage compression would be as significant in South Africa, Brazil or India today as they were in the Nordic countries between 1935 and 1970. The political feasibility of a policy of wage compression, however, is open to doubt, hence our agnosticism regarding whether or not the social democratic road to affluence can be repeated. In this paper we consider social democracy to be model of development rather than an end state. In particular, we will not enter into the debate regarding the future prospects of social democracy in Western Europe within the context of European economic integration, a common currency, an aging population and the ever increasing cost of providing the best health care that money can buy. The achievements of social democracy as a development strategy in terms of combining the socialist virtues of equality and security without losing the capitalist virtues of economic efficiency and technological dynamism are not seriously in dispute. What are disputed are the answers to the following questions: What was the contribution of specifically social democratic policies to the high level of affluence and equality in Northern Europe today. Would the policies that successfully promoted development in Northern Europe be equally effective and feasible in the third world in the context of an increasingly integrated global economy?