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Persistent Ideology and the Determination of Public Policies over Time

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Song, Zheng

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Abstract

This paper investigates how public policy responds to persistent ideological shifts in dynamic politico-economic equilibria. To this end, we develop a tractable model to analyze the dynamic interactions among public policy, individuals' intertemporal choice and the evolution of political constituency. Analytical solutions are obtained to characterize Markov perfect equilibria. Our main finding is that a right-wing ideology may increase the size of government. Data from a panel of 18 OECD countries confirm that after controlling for the partisan effect, there is a positive relationship between the right-wing political constituency and the government size. This is consistent with our theoretical prediction, but hard to explain by existing theories.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10364.

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Date of creation: 08 Mar 2008
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Handle: RePEc:pra:mprapa:10364

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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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  1. Kalt, Joseph P & Zupan, Mark A, 1984. "Capture and Ideology in the Economic Theory of Politics," American Economic Review, American Economic Association, vol. 74(3), pages 279-300, June. [Downloadable!] (restricted)
  2. Hassler, John & Storesletten, Kjetil & Zilibotti, Fabrizio, 2007. "Democratic public good provision," Journal of Economic Theory, Elsevier, vol. 133(1), pages 127-151, March. [Downloadable!] (restricted)
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  3. Per Krusell & Jose-Victor Rios-Rull, 1999. "On the Size of U.S. Government: Political Economy in the Neoclassical Growth Model," American Economic Review, American Economic Association, vol. 89(5), pages 1156-1181, December. [Downloadable!] (restricted)
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  4. Phillip Swagel & Efraim Sadka & Assaf Razin, 2002. "The Aging of the Population and the Size of the Welfare State," IMF Working Papers 02/68, International Monetary Fund. [Downloadable!]
  5. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January. [Downloadable!] (restricted)
  6. Perotti, Roberto & Kontopoulos, Yianos, 2002. "Fragmented fiscal policy," Journal of Public Economics, Elsevier, vol. 86(2), pages 191-222, November. [Downloadable!] (restricted)
  7. Stephen Morris & Hyun Song Shin, 2000. "Rethinking Multiple Equilibria in Macroeconomic Modelling," Cowles Foundation Discussion Papers 1260, Cowles Foundation, Yale University. [Downloadable!]
  8. Herrendorf, Berthold & Valentinyi, Akos & Waldmann, Robert, 2000. "Ruling Out Multiplicity and Indeterminacy: The Role of Heterogeneity," Review of Economic Studies, Blackwell Publishing, vol. 67(2), pages 295-307, April.
  9. Alesina, Alberto & Tabellini, Guido, 1990. "A Positive Theory of Fiscal Deficits and Government Debt," Review of Economic Studies, Blackwell Publishing, vol. 57(3), pages 403-14, July. [Downloadable!] (restricted)
  10. Torsten Persson, 2002. "Do Political Institutions Shape Economic Policy?," Econometrica, Econometric Society, vol. 70(3), pages 883-905, May. [Downloadable!] (restricted)
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  11. Jonsson, Gunnar, 1997. "Monetary politics and unemployment persistence," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 303-325, July. [Downloadable!] (restricted)
  12. Besley, Timothy & Coate, Stephen, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 85-114, February.
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  13. Assaf Razin & Efraim Sadka & Phillip Swagel, 2002. "The Aging Population and the Size of the Welfare State," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 900-918, August. [Downloadable!] (restricted)
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  14. Besley, Timothy & Coate, Stephen, 1998. "Sources of Inefficiency in a Representative Democracy: A Dynamic Analysis," American Economic Review, American Economic Association, vol. 88(1), pages 139-56, March. [Downloadable!] (restricted)
  15. Rafael Di Tella & Robert MacCulloch, 2005. "Partisan Social Happiness," Review of Economic Studies, Blackwell Publishing, vol. 72(2), pages 367-393, 04. [Downloadable!] (restricted)
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