8,440 research outputs found
International Unions
No full textWe model an international union as a group of countries deciding together on the provision of public goods or policies that generate spillovers across members. The trade-off between benefits of coordination and loss of independent policymaking endogenously determines size, composition and scope of the union. Policy uniformity reduces the union’s size, may block enlargement processes and induce excessive centralization. We study flexible rules with non-uniform policies that reduce these ine?- ciencies focusing on arrangements relevant in the context of existing unions or federal states, like enhanced cooperation, subsidiarity, federal mandates and earmarked grants.
Fiscal Policy after the Financial Crisis, Edited by Alberto Alesina and Francesco Giavazzi
No full textThe recent recession has brought fiscal policy back to the forefront, with economists and policy makers struggling to reach a consensus on highly political issues like tax rates and government spending. At the heart of the debate are fiscal multipliers, whose size and sensitivity determine the power of such policies to influence economic growth.
Fiscal Policy after the Financial Crisis focuses on the effects of fiscal stimuli and increased government spending, with contributions that consider the measurement of the multiplier effect and its size. In the face of uncertainty over the sustainability of recent economic policies, further contributions to this volume discuss the merits of alternate means of debt reduction through decreased government spending or increased taxes. A final section examines how the short-term political forces driving fiscal policy might be balanced with aspects of the long-term planning governing monetary policy
Political models of macroeconomic policy and fiscal reform
No full textThe author explains how recent developments in political economics improve our understanding of macroeconomic policy - especially the timing, design, and likelihood of stabilization's success through monetary and fiscal reform. The author reviews the literature on political business cycles and emphasizes several issues involving the relationship between the timing of elections and the timing of macroeconomic policies and outcomes. He also addresses how models can be useful in studying non-democratic systems. Two forces are crucial factors in both democratic and dictatorial systems, although they may manifest themselves differently: (1) the policymakers'incentive to retain power; and (2) society's polarization and the degree of social conflict. The author then analyzes why economic stabilization is delayed, even when it is obvious that sooner or later a stabilization program will have to be adopted. Some points made in the paper follow. Certain institutional characteristics make quick and successful stabilization more or less likely. The more unequal the distribution of stabilization's costs, the more likely that stabilization will be delayed. An increase in the cost of postponing stabilization reduces the delay. Political institutions that make it easier for small interest groups to veto legislation make delay more likely. If political and economic resources are unequally distributed, and it is obvious which group is stronger and has resources to wait longer, a war of attrition ends immediately, as there is no uncertainty about who will win it. Delay is more likely when information about who will bear the cost of delays is uncertain or unevenly distributed. Delay is also more likely when there is agreement about the need for fiscal change but a political stalemate about distribution - about how the burden of higher taxes or spending cuts should be allocated. Stabilization usually occurs when there is political consolidation. The burden of stabilization is sometimes unequal, with the politically weaker group (often the lower classes) bearing a larger burden (often regressive measures). If it is in the interest of the current government to do nothing for fear of failure because of government incompetence, the public may have no incentive to vote for the opposition because the opposition may also do nothing; the crucial factor here is how aware the government is of its own incompetence and thus its reasons for not attempting reform. Successful stabilization usually comes after several failed attempts, and the successful program is often very much like one that failed.Environmental Economics&Policies,Economic Theory&Research,National Governance,ICT Policy and Strategies,Health Economics&Finance
Large Changes in Fiscal Policy: Taxes Versus Spending
No full textWe examine the evidence on episodes of large stances in fiscal policy, both in cases of fiscal stimuli and in that of fiscal adjustments in OECD countries from 1970 to 2007. Fiscal stimuli based upon tax cuts are more likely to increase growth than those based upon spending increases. As for fiscal adjustments, those based upon spending cuts and no tax increases are more likely to reduce deficits and debt over GDP ratios than those based upon tax increases. In addition, adjustments on the spending side rather than on the tax side are less likely to create recessions. We confirm these results with simple regression analysis.
The New Political Macroeconomics: An Interview With Alberto Alesina
No full textInterviews economics professor Alberto Alesina from Harvard University regarding political macroeconomics. Educational background; Views on Keynesian economics; Contributions of Hibbs to the development of politico-economic models; Evidence against the median voter theorem; Weaknesses of rational partisan theory; Type of political system that is most conducive to macroeconomic stability.
Loss Aversion in Politics
No full textWe study loss aversion in majority voting. First, we show a status quo bias. Second, loss aversion implies a moderating effect. Third, in a dynamic setting, the effect of loss aversion diminishes with the length of the planning horizon of voters; however, in the presence of a projection bias, majorities are partially unable to understand how fast they will adapt. Fourth, in a stochastic environment, loss aversion yields a significant distaste for risk, but also a smaller attachment to the status quo. The application of these results to a model of redistribution leads to empirically plausible implications
Loss aversion in politics
No full textWe study loss aversion in elections by investigating a median voter model (full convergence in a two-candidate election) and a model of partial divergence of policy proposals. First, we show a status quo bias, an endowment effect, and a moderating effect of policies. Second, we show the occurrence of “long-term cycles” in policies with self-supporting movements to the right or the left. Finally, we prove that younger societies should be more prone to change and less affected by the status quo bias than older ones
Regulation Versus Taxation
No full textWe study which policy tool and at what level a majority chooses in order to reduce activities with negativeexternalities. We consider three instruments: a rule, that sets an upper limit to the activity which produces thenegative externality, a quota that forces a proportional reduction of the activity, and a proportional tax on it.For all instruments the majority chooses levels which are too restrictive when the activity is performed mainlyby a small fraction of the population, and when costs for reducing activities or paying taxes are sufficientlyconvex. Also a majority may prefer an instrument different than what a social planner would choose; for instance a rule when the social planner would choose a tax.[...
Culture and Institutions
No full textA growing body of empirical work measuring different types of cultural traits has shown that culture matters for a variety of economic outcomes. This paper focuses on one specific aspect of the relevance of culture: its relationship to institutions. We review work with a theoretical, empirical, and historical bent to assess the presence of a two-way causal effect between culture and institutions
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