Edoh Amiran

In this talk I will describe a dynamic economicmodel in which infrastructure is allocated by a government agentto a corrupt sector and an honest sector. The corrupt sector paysa bribe in the hope of receiving preferred access to infrastruc-ture. The model thus allows a comparison of options that maybe available to producers, in addition to letting the governmentagent maximize returns. The allocation decision is examinedwith variations in tax rates, bribe rates, and consumption ben-efits. The model shows that the two sectors and infrastructurereach a stable growth rate. The analysis examines the depen-dence of the accumulated capital and of the growth rate on theparameters, and the consequences for strategic behavior by pro-ducers.