1,722,361 research outputs found
Finn Kydland and Edward Prescott's contribution to the theory of macroeconomic policy
No full textFinn Kydland and Ed Prescott have transformed the field of macroeconomics with two path-breaking contributions. One is the idea of time inconsistency of optimal policy rules. The second is their analysis of business fluctuations.
Both contributions have profoundly changed the way we think about macroeconomic problems, both in academic research and in practical policymaking.
But while their analysis of business fluctuations is the result of a
research effort that lasted more than two decades, the idea of time inconsistency of policy stems from a single paper, Kydland and Prescott (1977).
After writing that paper, Kydland and Prescott have not returned to this topic except in a methodological paper on capital taxation; see Kydland and Prescott (1980). Yet, the idea was so important and powerful as to open up a whole new line of research in macroeconomics, that changed the way we study and implement economic policy. Rarely has a single paper had such a profound effect on economic research and the practice of economic
policymaking.
In this paper, I discuss the idea of time inconsistency, how it was formulated by Kydland and Prescott, and why its implications are so important.
Section II sets the stage and places the contribution by Kydland and Prescott in the context of the theory of macroeconomic policy. Section III analyses earlier formulations of the notion of time inconsistency. Section IV summarises Kydland and Prescott’s contribution and its main implications.
Section V briefly considers their impact on subsequent research and Section VI concludes
Constitutional Rules and Fiscal Policy Outcomes
No full textWe investigate the effect of electoral rules and forms of government on fiscal policy outcomes in a large sample of democracies. We rely on different estimation methods to address prospective problems of statistical inference, due to non-random selection of these constitutional rules. The findings are consistent with our theoretical priors: presidential regimes induce smaller governments than parliamentary democracies, while majoritarian elections lead to smaller governments and smaller welfare programs than proportional elections
Democratic capital: The nexus of political and economic change
No full textWe study the dynamics of economic and political change, theoretically and empirically. Democratic capital measured by a nation's historical experience with democracy, and the incidence of democracy in its neighborhood, appears to reduce exit rates from democracy and raise exit rates from autocracy. Higher democratic capital stimulates growth by increasing the stability of democracies. Heterogeneous effects of democracy induce sorting of countries into political regimes, which helps explain systematic differences between democracies and autocracies. Our results suggest the possibility of a virtuous circle, where accumulation of physical and democratic capital reinforce each other, promoting economic development and consolidation of democracy
The Economic Effects of Constitutions
No full textThe authors of The Economic Effects of Constitutions use econometric tools to study what they call the "missing link" between constitutional systems and economic policy; the book is an uncompromisingly empirical sequel to their previous theoretical analysis of economic policy. Taking recent theoretical work as a point of departure, they ask which theoretical findings are supported and which are contradicted by the facts. The results are based on comparisons of political institutions across countries or time, in a large sample of contemporary democracies. They find that presidential/parliamentary and majoritarian/proportional dichotomies influence several economic variables: presidential regimes induce smaller public sectors, and proportional elections lead to greater and less targeted government spending and larger budget deficits. Moreover, the details of the electoral system (such as district magnitude and ballot structure) influence corruption and structural policies toward economic growth.Persson and Tabellini's goal is to draw conclusions about the causal effects of constitutions on policy outcomes. But since constitutions are not randomly assigned to countries, how the constitutional system was selected in the first place must be taken into account. This raises challenging methodological problems, which are addressed in the book. The study is therefore important not only in its findings but also in establishing a methodology for empirical analysis in the field of comparative politics
The Growth Effects of Democracy: Is It Heterogeneous and How Can It Be Estimated?
No full textWe estimate the effect of political regime transitions on growth
with semi-parametric methods, combining difference in differences with
matching, that have not been used in macroeconomic settings. Our
semi-parametric estimates suggest that previous parametric estimates
may have seriously underestimated the growth effects of democracy.
In particular, we find an average negative effect on growth of leaving
democracy on the order of −2 percentage points implying effects
on income per capita as large as 45 percent over the 1960-2000 panel.
Heterogenous characteristics of reforming and non-reforming countries
appear to play an important role in driving these results
Democracy and development : the devil in the details
Full text linkDoes democracy promote economic development? This paper reviews recent attempts to
address this question that exploited within-country variation. It shows that the answer is
largely positive, but also depends on the details of democratic reforms. First, the sequence of
economic vs political reforms matters: countries liberalizing their economy before extending
political rights do better. Second, different forms of democratic government lead to different
economic policies, and this might explain why presidential democracy leads to faster growth
than parliamentary democracy. Third, it is important to distinguish between expected and
actual political reforms. Taking expectations of regime change into account helps identify a
stronger growth effect of democracy
Persson, T. (Editor). — Structure and function of northern coniferous forests. An ecosystem study. Stockholm, Ecological Bulletins, 32, 1980
No full textBourlière François. Persson, T. (Editor). — Structure and function of northern coniferous forests. An ecosystem study. Stockholm, Ecological Bulletins, 32, 1980. In: Revue d'Écologie (La Terre et La Vie), tome 35, n°4, 1981. p. 682
Electoral Systems and Economic Policy
No full textThis chapter discusses recent theoretical and empirical research on one feature of modern democracies: the electoral rule. Our central conclusion is that the electoral rule systematically shapes economic policy. We show that to understand the extent of political corruption, the devil is in the details of electoral systems, such as the ballot structure or district magnitude. In the case of the size of government and fiscal policy outcomes, the effects are associated with the broad distinction between proportional vs majoritarian systems. The effects are often large enough to be of genuine economic interest
Reply to Blankart and Koester's Political Economics vs Public Choice-Two views of political economy in competition
No full textIn an article in this issue of Kyklos, CharlesBlankart and Gerrit Koester discuss public choice and political economics as two separate and competing research paradigms. We do not agree with this premise: public choice and political economics are not in competition. To us, public choice and political economics
aremore labels than competing paradigms, and the research under these labels study similar problems with similar approaches. A major difference is that public choice started much earlier on, when the analytical methods of economics were different and, many would say, less advanced. Political
economics largely continues the tradition of public choice, taking advantage of the progress achieved by economics over the last 25 years in the precision of theoretical modeling and empirical inference.
Blankart and Koester also claim that we do not give credit where credit is due, and that we overlooked earlier research on representative democracy by scholars such as Downs, Tullock, Riker, Ordeshook and others. We strongly reject this claim, and we wonder whether Blankart and Koester ever closely
looked at the book on political economics by Persson and Tabellini (2000).
Chapters 2 and 3 of that book are almost entirely devoted to reviewing early contributions on representative democracy
How do Electoral Rules Shape Party Structures, Government Coalitions and Economic Policies?
No full textWe present a theoretical model of a parliamentary democracy, where party structures, government coalitions and fiscal policies are endogenously determined. The model predicts that, relative to proportional elections, majoritarian elections reduce government spending because they reduce party fragmentation and, therefore, the incidence of coalition governments. Party fragmentation can persist under majoritarian rule if party supporters are unevenly distributed across electoral districts. Economic and political data, from up to 50 post-war parliamentary democracies, strongly support our joint predictions from the electoral rule, to the party system, to the type of government, and to government spending
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