1,721,347 research outputs found
Ideas or institutions? A comment
No full textDeirdre McCloskey is right, economists interested in comparative development ought to pay more attention to the history of ideas. But, which ideas? And how do they emerge? In this short paper I argue that other ideas, besides the bourgeois ethics, are at least as important. And that a new emphasis on ideas does not make institutions less important, nor does it require that we abandon the traditional method of economics
Culture and institutions: Economic development in the regions of Europe
No full textDoes culture have a causal effect on economic development? The data on European regions suggest that it does. Culture is measured by indicators of individual values and beliefs, such as trust and respect for others, and confidence in individual self determination. To isolate the exogenous variation in culture, we rely on two historical variables used as instruments: the literacy rate at the end of the 19th century, and the political institutions in place over the past several centuries. The political and social history of Europe provides a rich source of variation in these two variables at a regional level. The exogenous component of culture due to history is strongly correlated with current regional economic development, after controlling for contemporaneous education, urbanization rates around 1850, and national effects. © 2010 by the European Economic Association
The Politics of Intergenerational Redistribution
No full textThis paper studies the political-economic equilibrium of a twoperiod model with overlapping generations. In each period the policy is chosen under majority rule by the generations currently alive. The paper identifies a "politically viable" set of values for public debt. Any amount of debt within this set is fully repaid in equilibrium, even without commitments. By issuing debt within this set, the first generation redistributes revenue in its favor and away from the second generation. The paper characterizes the determinants of the equilibrium intergenerational redistribution and identifies a difference between debt and social security as instruments of redistribution
Political economics - Explaining economic policy
No full textWhat determines the size and form of redistributive programs, the extent and type of public goods provision, the burden of taxation across alternative tax bases, the size of government deficits, and the stance of monetary policy during the course of business and electoral cycles? A large and rapidly growing literature in political economics attempts to answer these questions. But so far there is little consensus on the answers and disagreement on the appropriate mode of analysis. Combining the best of three separate traditions -- the theory of macroeconomic policy, public choice, and rational choice in political science -- Torsten Persson and Guido Tabellini suggest a unified approach to the field. As in modern macroeconomics, individual citizens behave rationally, their preferences over economic outcomes inducing preferences over policy. As in public choice, the delegation of policy decisions to elected representatives may give rise to agency problems between voters and politicians. And, as in rational choice, political institutions shape the procedures for setting policy and electing politicians. The authors outline a common method of analysis, establish several new results, and identify the main outstanding problems
Institutions and Culture
No full textHow and why does distant political and economic history shape the functioning of current institutions? This paper argues that individual values and convictions about the scope of application of norms of good conduct provide the “missing link.” Evidence from a variety of sources points to two main findings. First, individual values consistent with generalized (as opposed to limited) morality are widespread in societies that were ruled by non-despotic political institutions in the distant past. Second, well-functioning institutions are often observed in countries or regions where individual values are consistent with generalized morality, and under different identifying assumptions this suggests a causal effect from values to institutional outcomes. The paper ends with a discussion of the implications for future research. (JEL: A10, D7, E00
Monetary policy strategy: lessons from the crisis– comments
No full textThis a comment on the papers "Lessons for monetary policy strategies from the recent past" by Stephan Fahr, Roberto Motto, Massimo Rostagno, Frank Smets,and Oreste Tristani and "Monetary Policy Strategy: Lessons from the crisis" by Frederic S. Mishkin
Inflation Targets Reconsidered: Comments on Paul Krugman
No full textPaul Krugman has written a very timely paper. It discusses an old issue, that has become very relevant again. My comments address two questions. First, should inflation targeting be reconsidered? Here my answer is a clear and resounding yes. Inflation targeting
performed very well in the fight against inflation and in stabilizing inflation expectations. But now, even leaving issues of financial stability aside, monetary policy is faced with different challenges. Second, which features of the inflation targeting framework should
be changed? Here I argue that other aspects of the framework are more important than the numerical value of the target. In addressing these questions, I review Paul Krugman???s arguments, agreeing with many but not all of them
The Scope of Cooperation: Values and Incentives
Full text linkWhat explains the range of situations in which individuals cooperate? This paper studies a model where individuals respond to incentives but are also influenced by norms of good conduct inherited from earlier generations. Parents rationally choose what values to transmit to their offspring, and this choice is influenced by the spatial patterns of external enforcement and of likely future transactions. The equilibrium displays strategic complementarities between values and current behavior, which reinforce the effects of changes in the external environment. Values evolve gradually over time, and if the quality of legal enforcement is chosen under majority rule, there is path dependence: adverse initial conditions may lead to a unique equilibrium where legal enforcement remains weak and individual values discourage cooperation. (c) 2008 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..
Economic and political liberalizations
Full text linkThis paper studies empirically the effects of and the interactions amongst economic and
political liberalizations. Economic liberalizations are measured by a widely used indicator that
captures the scope of the market in the economy, and in particular of policies towards freer
international trade (cf. Sachs and Werner 1995, Wacziarg and Welch 2003). Political
liberalizations correspond to the event of becoming a democracy. Using a difference-indifference
estimation, we ask what are the effects of liberalizations on economic performance,
on macroeconomic policy and on structural policies. The main results concern the quantitative
relevance of the feedback and interaction effects between the two kinds of reforms. First, we
find positive feedback effects between economic and political reforms. The timing of events
indicates that causality is more likely to run from political to economic liberalizations, rather
than viceversa, but we cannot rule out feedback effects in both directions. Second, the
sequence of reforms matters. Countries that first liberalize and then become democracies do
much better than countries that pursue the opposite sequence, in almost all dimensions
The clan and the corporation: sustaining cooperation in China and Europe
No full textOver the last millennium, the clan and the corporation have been the loci of cooperation in China and Europe respectively. This paper examines – analytically and historically – the cultural and institutional co-evolution that led to this bifurcation. We highlight that groups with which individuals identify are basic units of cooperation. Such loyalty groups influence institutional development because intra-group moral commitment reduces enforcement cost implying a comparative advantage in pursuing collective actions. Loyalty groups perpetuate due to positive feedbacks between morality, institutions, and the implied pattern of cooperation
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