Minimizing Public Sector Corruption: The Economics of Crime, Identity Economics, and Money Laundering

Abstract

This paper offers a simple strategic framework to help governments use various policy mechanisms to minimize public sector corruption. The paper offers a formal model that blends economics of crime models with identity economics and money laundering. It presents a partial equilibrium framework that focuses on a representative public official engaged in a mix of legal and illegal effort. The model introduces various levers a government might use to impact the costs and benefits of illegal effort. The ultimate goal is to help turn volatile vicious cycles of political instability, into steady virtuous cycles of stability, growth and sustainable development.