Political intervention in economic activity
This paper proposes a political economy explanation of bailouts to declining industries. A model of probabilistic voting is developed, in which two candidates compete for the vote of two groups of the society through tactical redistribution. We allow politicians to have core support groups they understand better, this implies politicians are more or less effective to deliver favors to some groups. This setting is suited to reproduce pork barrels or machine politics and patronage. We use this model to illustrate the case of an economy with both an efficient industryand a declining one, in which workers elect their government. We present the conditions under which the political process ends up with the lagged-behind industry being allowed to survive.
|Date of creation:||31 May 2010|
|Date of revision:|
|Contact details of provider:|| |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Janos Kornai & Eric Maskin & Gerard Roland, 2002.
"Understanding the Soft Budget Constraint,"
Economics Working Papers
0019, Institute for Advanced Study, School of Social Science.
- J�nos Kornai & Eric Maskin & G�rard Roland, 2003. "Understanding the Soft Budget Constraint," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1095-1136, December.
- J. Kornai & E. Maskin & G. Roland., 2004. "Understanding the Soft Budget Constraint," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 12.
- J. Kornai & E. Maskin & G. Roland., 2004. "Understanding the Soft Budget Constraint," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 11.
- Robinson, James A & Torvik, Ragnar, 2005.
"A Political Economy Theory of the Soft Budget Constraint,"
CEPR Discussion Papers
5274, C.E.P.R. Discussion Papers.
- Robinson, James A. & Torvik, Ragnar, 2009. "A political economy theory of the soft budget constraint," European Economic Review, Elsevier, vol. 53(7), pages 786-798, October.
- James A. Robinson & Ragnar Torvik, 2005. "A Political Economy Theory of the Soft Budget Constraint," Working Paper Series 5605, Department of Economics, Norwegian University of Science and Technology.
- James A. Robinson & Ragnar Torvik, 2006. "A Political Economy Theory of the Soft Budget Constraint," NBER Working Papers 12133, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:col:000092:007180. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paola Villalobos)
If references are entirely missing, you can add them using this form.