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Do Political Institutions Shape Economic Policy?

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  • Torsten Persson

Abstract

Do political institutions shape economic policy? I argue that this question should naturally appeal to economists. Moreover, the answer is in the affirmative, both in theory and in practice. In particular, recent theoretical work predicts systematic eects of electoral rules and political regimes on the size and composition of government spending. And results from ongoing empirical work indicate that such eect are indeed present in international panel data. Some empirical results are consistent with theoretical predictions: presidential regimes have smaller governments and countries with majoritarian elections have smaller welfare-state programs and less corruption. Other results present puzzles for future research: the adjustment to economic events is clearly institution-dependent, as is the timing and nature of the electoral cycle.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8214.

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Date of creation: Apr 2001
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Publication status: published as Persson, Torsten. "Do Political Institutions Shape Economic Policy," Econometrica, 2002, v70(3,May), 883-905.
Handle: RePEc:nbr:nberwo:8214

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  1. Shi, Min & Svensson, Jakob, 2002. "Conditional Political Budget Cycles," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3352, C.E.P.R. Discussion Papers.
  2. Torsten Persson & Guido Tabellini & Francesco Trebbi, . "Electoral Rules and Corruption," Working Papers 182, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Persson, Torsten & Roland, Gérard & Tabellini, Guido, 1997. "Comparative Politics and Public Finance," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1737, C.E.P.R. Discussion Papers.
  4. Persson, Torsten & Roland, Gerard & Tabellini, Guido, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1163-1202, November.
  5. Torsten Persson & Guido Tabellini, 2004. "Constitutions and Economic Policy," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 18(1), pages 75-98, Winter.
  6. Torsten Persson & Guido Tabellini, 1997. "Political Economics and Macroeconomic Policy," NBER Working Papers 6329, National Bureau of Economic Research, Inc.
  7. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, Elsevier, vol. 76(3), pages 399-457, June.
  8. Alessro Lizzeri & Nicola Persico, . "The Provision of Public Goods Under Alternative Electoral Incentives," Penn CARESS Working Papers, Penn Economics Department b96440ba0bfa06ca550ac40aa, Penn Economics Department.
  9. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
  10. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262510944, December.
  11. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  12. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1, July.
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