Endogenous Economic Policy And The Structure Of Production: Theory And Evidence
AbstractThis paper develops and tests a model that predicts a positive relationship between absolute levels of capital stock and how favourable are policies toward capital. The theoretical model we use is a model of campaign contributions and electoral competition, extended to consider the implications for factor mobility and hence the structure of production. There are two main predictions. First, countries with more capital stock tend to implement more pro-capital policies. Second, in a two country model, the country that initially has more capital will be able to attract capital infows from the other country. Given additional assumptions on the production side, this yields the prediction that the more different are countries.policies, the more different will be the set of goods which they produce. These predictions of the model are confrmed using panel data on cross-state differences in policies and economic outcomes in India.
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Bibliographic InfoArticle provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.
Volume (Year): 54 (2007)
Issue (Month): 2 (05)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0036-9292
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Other versions of this item:
- K T Soo, 2005. "Endogenous economic policy and the structure of production: theory and evidence," Working Papers 565968, Lancaster University Management School, Economics Department.
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