A THEORY OF MISGOVERNANCE

This paper tries to explain why government bureaucracies are often ass ociated with red tape, corruption, and lack of incentives. The paper i dentifies two specific ingredients that together can provide an explan ation: the fact that governments often act precisely in situations whe re markets fail and the presence of agency problems within the governm ent. We show that these problems are exacerbated at low levels of deve lopment and in bureaucracies dealing with poor people. we also argue t hat we need to posit the existence of a welfare-oriented constituency within the government in order to explain red tape and corruption.