Oliver Publishes Study on Corruption and Resource Use in Developing World

Posted October 8, 2015

The current issue of Strategic Behavior and the Environment (SBE), a journal devoted to applied game theory for environmental and natural resource economics, features an original research article by Dr. Matthew E. Oliver of the Georgia Tech School of Economics, along with his colleague and former advisor from the University of Wyoming Department of Economics and Finance, Dr. Jason F. Shogren. The article, entitled “Contests, Common Agency, and Corruption: Why the Green Candidate Seldom Wins,” presents a novel theory on the persistence of public sector corruption in the developing world—corruption that is well understood by economists to lead to inefficient natural resource use and greater environmental degradation.

Oliver and Shogren explain that through a relationship called “common agency”, an elected official extracts bribes from agricultural and resource firms in exchange for favorable subsidization policies. The more corrupt the official, the greater the bribe, and the more firms will engage in inefficient, environmentally damaging production practices. Using “contest theory,” Oliver and Shogren then demonstrate that in a political contest between a corrupt incumbent and a virtuous “green” challenger, the incumbent – having more to lose – expends greater effort in winning and is always the contest favorite. The green challenger is always the contest underdog, meaning she has a lower probability of winning the political contest and cleaning up the firms’ behavior.

For more information or to read the article, visit this link or contact Dr. Oliver.