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Political Institutions and Economic Growth

  • Marsiliani, Laura
  • Renström, Thomas I
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    We analyze the impact of micro-founded political institutions on economic growth in an overlapping-generations economy, where individuals differ in preferences over a public good (as well as in age). Labour and capital taxes finance the public good and a public input. The benchmark institution is a parliament, where all decisions are taken. Party entry, parliamentary composition, coalition formation, and bargaining are endogenous. We compare this constitution to delegation of decision-making, where a spending minister (elected in parliament or appointed by the largest party). Delegation of decision-making tends to yield lower growth, mainly due to the occurrence of production inefficiency.

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    Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6143.

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    Date of creation: Feb 2007
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    Handle: RePEc:cpr:ceprdp:6143
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