Credible Commitments and Investment: Does Opportunistic Ability or Incentive Matter?
AbstractPrivate investment increases in a cross-country panel when formal institutions (e.g., term limits) do not constrain executives' planning horizons. This evidence is consistent with institutions that encourage reputation-building checking opportunistic incentives and extends evidence from domestic public choice applications to an international political economy setting. In addition, investment exhibits a nonmonotonic relationship with a polity's veto players. This relationship may reflect trade-offs between constituents' monitoring-capacity and agents' opportunistic ability. It may also highlight a channel through which lock-in effects retard neoclassical convergence and thus motivate different normative prescriptions than those emerging from contributions where institutions and real activity must exhibit a monotonic relationship. (JEL D72, D78, E61) Copyright 2003, Oxford University Press.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 41 (2003)
Issue (Month): 4 (October)
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Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
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