Political Economy in Macroeconomics

By Allan Drazen. 2018

1,538 citations recorded by the source corpus.

PRINCETON, NEW JERSEY account libcralization as a signal of commitmcnt to economic reform. Wc also summarizc thc empirical rcscarch on political determinants of capital controls. Another major issue in open-economy macroeconomics is sovereign debt, that is, the debt owed by a government to foreign creditors. hsucs of sovereign debt arc substantially different than those concerning nonsovereign debt and arc inherently political. For example, since it is oWed by the government, repayment decisions are not connectcd with any question of the ability to repay. With few exceptions, a borrower country has the technical ability to repay the debt, so that non-repayment is a political issue. In Section 12.8, we analyze basic models of sovereign ,c,, borrowing and its repayment, especially the role of penalties in enforcing repayment. We also consider the importance of political versus nonpolitical penalties in the decision of whether to issue debt at home or abroad. The final topic considered is foreign assistance, especially lending by governments and international financial organizations to developing countries for the purpose of structural adjustment. Our point of departure is the strikingly disappointing results that foreign aid programs have had in alleviating poverty and stimulating growth in the recipient countries, a failure that we argue reflects the political nature of aid. Foreign assistance is inherently political for a number of reasons. First, the incentives of the donors may be political, not only in the obvious sense that aid is often given for strategic political reasons, but also because the nature of aid (and especially its ineffectiveness) often reflects political and bureaucratic conflicts within the donor organizations. Second, the ineffectiveness of aid is also very much attributed to misappropriation by the recipients, where this is widely believed to reflect political factors. There are a number of models which formalize the role of political factors, as well as much empirical work detailing the role of political factors in explaining the ineffectiveness of aid.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/4b7465c0c8ca9ea9ae04b6577edb825d6acb9bf1

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

Citations in the corpus

Fiscal Policy: Institutions versus Rules (2005, neutral): “This view, championed by Buchanan and Tullock (1962), has been refined by the political economy literature ( Drazen, 2000; Persson and Tabellini, 2000).”
Output fluctuations and fiscal policy: U.S. state and local governments 1978-1994 (2001, background): “The role of 5scal and political institutions There is wide agreement regarding the role of institutions and, in particular, political institutions in shaping "scal policy (see Poterba and von Hagen, 1999; Alesina et al., 1997; Drazen, 2000; and footnote 42).”
Fiscal policy responsiveness, persistence, and discretion (2010, neutral): “9 The economic literature has generally focused on political and institutional characteristics to explain cross country differences in government spending ( Drazen 2000; Persson 2001; Persson and Tabellini 2001).”
Political Budget Cycles in New Versus Established Democracies (2005, background): “Drazen and Eslava (2004a) present a model of rational voter in the first case and present evidence on the importance of composition of spending effects for the political budget cycle in regional and municipal elections in Colombia.”
Why Do More Polarized Countries Run More Procyclical Fiscal Policy? (2009, background): “[17] Drazen, Allan (2000), Political Economy in Macroeconomics, Princeton: Princeton University Press.”
Income Distribution in Macroeconomic Models (2005, background): “…little more than a sketch regarding processes through which policy preferencesmay be aggregated into policy choices: readersmay find in Persson and Tabellini (2000) and Drazen (2000) insightful treatments focused on those mechanisms, at a technical level and in a style similar to that of our book.”
Do Countries Have a “Democratic Advantage”? (2005, background): “However, these mechanisms tend to fail under a wide array of conditions (see Drazen, 2000, for a summary of these arguments).”
Contribution to Productivity or Pork Barrel? : The Two Faces of Infrastructure Investment (2002, background): “(21) If infrastructure access is priced at the socially optimal level (e ωk = 0, k = A, B), after substitution of the equilibrium value of Lik this becomes ziA + ziB 2 = eβρbk μb u f 1 x (x k) + eβφik μb f 0 x (x k), k = A, B.”
Democracy and dictatorship revisited (2010, background): “…suffer because of governments’ attempts to manipulate the economy for electoral purposes (Nordhaus 1975 and Tufte 1978 for early formulations, and Drazen 2000 for a review of recent developments) or, alternatively, long-term economic performance may improve because voters can sanction incumbents…”
The Diversity Of Modern Capitalism (2003, background): “Following Drazen (2000), one may state that heterogeneity is central to much of economics: it stems from gender in the etiquette game, but could arise from tastes, wealth, skills, expectations, etc. Out of heterogeneity come divergences in agents' interests. In many instances, the possible incompati”
Network Effects of Public Transport Infrastructure: Evidence on Italian Regions (2012, neutral): “…to political business cycle effects (PBC; Nordhaus, 1975), which are driven by economic decisions of incumbent politicians aiming at increasing the probability of being re-elected (Dixit, 1996; Drazen, 2000; Persson and Tabellini, 2000; Grossman and Helpman, 2001, Cadot, Roller and Stephan, 2006).”
Preferences for Redistribution (2009, background): “1See Persson and Tabellini (2002) and Drazen (2002) for a broad review of political economic models. what an appropriate shape of the income distribution is: in practice, views about acceptable levels of inequality and/or poverty.”