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Do Political Institutions Shape Economic Policy?

  • Torsten Persson

    ()

    (Institute for International Economic Studies, Stockholm University, Sweden)

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 effects of electoral rules and political regimes on the size and composition of government spending. Results from ongoing empirical work indicate that such effects are indeed present in the 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 appears highly institution-dependent, as does the timing and nature of the electoral cycle. Copyright The Econometric Society 2002.

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Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 70 (2002)
Issue (Month): 3 (May)
Pages: 883-905

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Handle: RePEc:ecm:emetrp:v:70:y:2002:i:3:p:883-905
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  1. Persson, T. & Tabellini, G., 1997. "Political Economics and Macroeconomic Policy," Papers 630, Stockholm - International Economic Studies.
  2. Nicola Persico & Alessandro Lizzeri, 2001. "The Provision of Public Goods under Alternative Electoral Incentives," American Economic Review, American Economic Association, vol. 91(1), pages 225-239, March.
  3. Torsten Persson & Guido Tabellini & Francesco Trebbi, 2003. "Electoral Rules and Corruption," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 958-989, 06.
  4. Torsten Persson & Gerard Roland & Guido Tabellini, . "Separation of Powers and Political Accountability," Working Papers 100, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  5. Shi, Min & Svensson, Jakob, 2002. "Conditional Political Budget Cycles," CEPR Discussion Papers 3352, C.E.P.R. Discussion Papers.
  6. Persson, T. & Roland, G. & Tabellini, G., 1997. "Comparative Politics and Public Finance," Papers 633, Stockholm - International Economic Studies.
  7. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1, May.
  8. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, June.
  9. 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, vol. 58(2), pages 277-97, April.
  10. 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.
  11. Torsten Persson & Guido Tabellini, 2004. "Constitutions and Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 18(1), pages 75-98, Winter.
  12. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
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