1,721,036 research outputs found
On Wars and Political Development. The Role of International Conflicts in the Democratization of the West
No full textPrinceton University, Research Program in Political Economy, Working Pape
Incertezza e investimenti
No full textThe paper proposes a dynamic partial equilibrium model where competitive firms with constant return to scale technology are risk averse. Firms are subject to output price uncertainty. We show that it is possible that the investment-uncertainty relationship is positive even when firms have a high degree of risk aversion. Indeed, the paper shows that risk aversion can explain the negative relationship between investment and uncertainty only in a static context. In a dynamic framework, the linkage between periods can lead risk aversion to have a positive effect on investment when uncertainty increases. Moreover, the paper shows that investment should be positively correlated with uncertainty for reasonable values of the preference and technological parameters
War and endogenous democracy
Get PDFMany episodes of extension of franchise in the 19th and especially in the 20th century occurred during or in the aftermath of major wars. Motivated by this fact, we offer a theory of political transitions which focuses on the impact of international conflicts on domestic political institutions. We argue that mass-armies, which appeared in Europe after the French Revolution, are an effective military organization only if the conscripted citizens are willing to put effort in fighting wars, which in turn depends on the economic incentives that are provided to them. The need to provide such incentives implies that an oligarchy adopting a mass-army may voluntarily decide to promise some amount of income redistribution to its citizens, conditionally on satisfactory performance as soldiers. When the elite cannot credibly commit to provide an incentive-compatible redistribution, they may cope with the moral hazard problem of the citizens-soldiers only by relinquishing political power to them through the extension of franchise. This is because democracy always implements a highly redistributive fiscal policy, which makes fighting hard incentive-compatible for the citizens-soldiers. We show that a transition to democracy is more likely to occur when the external threat faced by an incumbent oligarchy is in some sense intermediate. A very high external threat allows the elite to make credible commitments of future income redistribution in favor of the citizens, while a limited external threat makes optimal for the elite not making any (economic or political) concession to the masses. Some historical evidence consistent with our theory is also provided
Engineering Crises: Favoritism and Strategic Fiscal Indiscipline
No full textIf people understand that some macroeconomic policies are unsustainable, why would they vote for them in the first place? We develop a political economy theory of the endogenous emergence of fiscal crises, based on the idea that the adjustment mechanism to a crisis favors some social groups, that may be induced ex-ante to vote in favor of policies that are more likely to lead to a crisis. People are entitled to a certain level of a publicly provided good, which may be rationed in times of crises. After voting on that level, society votes on the extend to which it will be financed by debt. Under bad enough macro shocks, a crisis arises: taxes are set at their maximum but despite that some agents do not get their entitlement. Some social groups do better in this rationing process than others. We show that public debt -- which makes crises more likely -- is higher, as is the probability of a crisis, the greater the level of favoritism. If the favored group is important enough to be pivotal when society votes on the entitlement level, favoritism also leads to greater public expenditure. We show that the favored group may strategically favor a weaker state in order to make crises more frequent. Finally, the decisive voter when choosing expenditure may be different from the one when voting on debt. In such a case, constitutional limits on debt may raise the utility of all the poor, relative to the equilibrium outcome absent such limits
An Economic Analysis of Judicial Careers
Get PDFThe aim of this paper is to analyze from an economic perspective the effects of the judicial careers arrangement on the trials' outcome. The institutional organization of judicial careers follows two distinct ideal systems. One is characterized by the fact that public prosecutor and judge belong to the same professional body, as magistrates, while the other one is characterized by the separation of the judiciary from prosecutors. We model this feature of the judicial system as a continuum variable and explain why this choice can be appropriate. We obtain that a more unified system of judicial careers leads to fewer distortions in the process preceding the trial, while it introduces more distortions during the trial. We find the optimal degree of separation of judicial careers and provide some comparative statics results
Forbidden fruits: the political economy of science, religion, and growth
Get PDFWe study the co-evolution of religion, science, and politics. We first uncover, in international and U.S. data, a robust negative relationship between religiosity and patents per capita. The model then combines: (1) scientific discoveries that raise productivity but sometimes erode religious beliefs; (2) a government that allows innovations to diffuse, or blocks them; (3) religious institutions that can invest in doctrinal reform. Three long-term outcomes emerge. The “Western-European Secularization” regime has declining religiosity, unimpeded science, and high taxes and transfers. The “Theocratic” regime involves knowledge stagnation, unquestioned dogma, and high religious-public-goods spending. The “American” regime combines scientific progress and stable religiosity through doctrinal adaptations, with low taxes and some fiscal-legal advantages for religious activities. Rising income inequality can, however, empower a Religious-Right alliance that starts blocking belief-eroding ideas
Tax Morale, Fiscal Capacity, and Wars
Get PDFThis paper studies how mobilization for war motivates citizens to contribute to their
own community and therefore help forming tax morale in a constituency. We derive a
theoretical model to investigate government's decision to expand tax revenues from alternative
sources, namely changing the country's culture of tax compliance or expanding
fiscal capacity. Despite the two are initially substitute, we show how in equilibrium dynamic
complementarity arises. Our mechanism exploits exogenous variation in the cost of
tax morale formation, induced by an expected war (either internal or external) that makes
easier for the government to mobilize the constituency. We motivate our theory through a
novel cross-country analysis that uses information on war frequency, tax morale, and fiscal
capacity. We additionally discuss some historical cases consistent with our mechanism
- …
