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 Acemoglu and Zilibotti, 2001 QJE ss Multiple Equilibria Approach (e. g 复回火学经济院 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: why countries adopt o 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 so The"Median Voter Theorem"is the most popular one to pin 4 down the politico-economic i 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 familv or periods Skillful Unskillful Skillful Unskillful 123 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