Politico-Economic Equilibrium and Economic Growth 复9大学经学院
Politico-Economic Equilibrium and Economic Growth
Part 1: Background Data show that growth g performances are very different cross countries g. There are at least three approaches to explain the differences s Endowment Approach(e.g.i Acemoglu and Zilibotti, 2001, 3 QJE 4s Multiple Equilibria Approach (e.gr Azariadis and Drazen, 1990, QJE
Part 1: Background ❖ Data show that growth performances are very different cross countries. ❖ There are at least three approaches to explain the differences. ❖ Endowment Approach (e.g. Acemoglu and Zilibotti, 2001, QJE) ❖ Multiple Equilibria Approach (e.g. Azariadis and Drazen, 1990, QJE) Policy Approach (e.g. Barro
Policy Approach s Public policies may have huge g impacts on economic growth &For example, increasing capital tax rate drops the interest rate and then depresses physical capital accumulation. Higher wage tax rate has the same effect on human capital accumulation &The following question comes naturally:W thy countries adopt different public policies (or non-5 optimal policy)?
Policy Approach ❖ Public policies may have huge impacts on economic growth. ❖ For example, increasing capital tax rate drops the interest rate and then depresses physical capital accumulation. Higher wage tax rate has the same effect on human capital accumulation. ❖ The following question comes naturally: why countries adopt different public policies (or nonoptimal policy)?
Political Economy .Public Policy is endogenously generated from political economy rather than an abstract benevolent government &A number of theories tell us how public policies are determined in a political economy (a survey see Persson and Tabellini'si book, 2000, MIT The" Median voter Theorem”s学 the most popular one to pin 4 down the politico-economic iF equilibrium
Political Economy ❖ Public Policy is endogenously generated from political economy rather than an abstract benevolent government. ❖ A number of theories tell us how public policies are determined in a political economy (a survey see Persson and Tabellini’s book, 2000, MIT). ❖ The “Median Voter Theorem” is the most popular one to pin down the politico-economic equilibrium
Part 2: A Basic Model & Environment: Consider a Three go Period economy. Only one generation lives in each period Every generation consists of a skillful and a unskillful family(S and U henceforth). S in the current period gives birth to S in the next period, so as UN Generations Family or periods Skillful Unskillful Skillful Unskillful 2 Skillful Unskillful 复9大学经学院
Part 2: A Basic Model ❖ Environment: Consider a ThreePeriod economy. Only one generation lives in each period. Every generation consists of a skillful and a unskillful family (S and U henceforth). S in the current period gives birth to S in the next period, so as U. Skillful Skillful Skillful Unskillful Unskillful Unskillful Family 1 Generations (or periods) 2 3