What determines the size and form of redistributive programs, the extent and type of public goods provision, the burden of taxation across alternative tax bases, the size of government deficits, and the stance of monetary policy during the course of business and electoral cycles? A large and rapidly growing literature in political economics attempts to answer these questions. But so far there is little consensus on the answers and disagreement on the appropriate mode of analysis.
Combining the best of three separate traditions―the theory of macroeconomic policy, public choice, and rational choice in political science―Torsten Persson and Guido Tabellini suggest a unified approach to the field. As in modern macroeconomics, individual citizens behave rationally, their preferences over economic outcomes inducing preferences over policy. As in public choice, the delegation of policy decisions to elected representatives may give rise to agency problems between voters and politicians. And, as in rational choice, political institutions shape the procedures for setting policy and electing politicians. The authors outline a common method of analysis, establish several new results, and identify the main outstanding problems.

Political Economics: Explaining Economic Policy (Zeuthen Lectures)

Literature & Fiction

Persson, Torsten

Tabellini, Guido

Dramas & Plays

The MIT Press

The Economic Effects of Constitutions (Munich Lectures in Economics)

The authors of The Economic Effects of Constitutions use econometric tools to study what they call the "missing link" between constitutional systems and economic policy; the book is an uncompromisingly empirical sequel to their previous theoretical analysis of economic policy. Taking recent theoretical work as a point of departure, they ask which theoretical findings are supported and which are contradicted by the facts. The results are based on comparisons of political institutions across countries or time, in a large sample of contemporary democracies. They find that presidential/parliamentary and majoritarian/proportional dichotomies influence several economic variables: presidential regimes induce smaller public sectors, and proportional elections lead to greater and less targeted government spending and larger budget deficits. Moreover, the details of the electoral system (such as district magnitude and ballot structure) influence corruption and structural policies toward economic growth.Persson and Tabellini's goal is to draw conclusions about the causal effects of constitutions on policy outcomes. But since constitutions are not randomly assigned to countries, how the constitutional system was selected in the first place must be taken into account. This raises challenging methodological problems, which are addressed in the book. The study is therefore important not only in its findings but also in establishing a methodology for empirical analysis in the field of comparative politics.

The European Union faces difficult challenges: to go on with further enlargement; to reconcile radically different views on the appropriate scope and depth of integration; and to close the democratic deficit and revive public support for the Union. Written by a distinguished team of academics from six countries to inform public opinion before the 1996 Intergovernmental Conference, CEPR's sixth Monitoring European Integration Report argues for significant economic, political and legal reforms of the Union to meet these challenges. Flexible Integration is a model of reform designed to overcome the current stalemate between federalists and anti-federalists. It introduces more flexibility to accommodate the heterogeneous interests in Europe without risking the gains achieved through past integration. Flexible integration combines firm commitment by all members to a common supranational common base - including a well-defined set of competences related to the Single Market - with optional integration in other areas through open partnerships. Within these ramifications, the report discusses a number of specific reforms, including: how to introduce a hierarchy of European Law, making the Union's legal structure more flexible and transparent; how to improve enforcement of the Single Market, realising the vision underlying the four freedoms; how to achieve macroeconomic coordination without the tarnished exchange rate mechanism, while accommodating the different views on the single currency; and how to make political decision-making more efficient and legitimate, representing and balancing different European interests and making decision-makers more directly accountable to the citizens of Europe.

Flexible Integration: Towards a More Effective and Democratic Europe (Monitoring European Integration, No 6)

Business & Money

Rosenthal, Howard

Roland, Gérard

Dewatripont, Mathias

Giavazzi, Francesco

Harden, Ian

Hagen, Jurgen Von

Sapir, Andre

Economics

Centre for Economic Policy Research

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