Contests, Common Agency, and Corruption: Why the Green Candidate Seldom Wins

Abstract

Public sector corruption has been linked to resource dependency and environmental degradation in the developing world. Herein, we examine the persistence of public sector corruption by modeling an elected public official with the power to set agricultural/resource input-subsidization policy in a developing economy. Through common agency, firms offer bribes to influence policy. A more corrupt official extracts a greater bribe. This implies in a political contest between two candidates with different propensities for corruption, the corrupt incumbent, having the greater prize at stake, always expends greater effort and is the contest favorite. The less corrupt 'green' challenger is always the contest underdog. Our results suggest that i) corruption is politically advantageous; and ii) corruption and political instability are mutually reinforcing, leading to over-harvesting and too much pollution.