Alesina, Alberto, Philippe Aghion, Francesco Trebbi, and E Helpman. 2008. “Democracy, Technology and Growth.” Institutions and Economic Performance, 511-43. Cambridge, MA: Harvard University Press. Abstract
We explore the question of how political institutions and particularly democracy affect economic growth. Although empirical evidence of a positive effect of democracy on economic performance in the aggregate is weak, we provide evidence that democracy influences productivity growth in different sectors differently and that this differential effect may be one of the reasons of the ambiguity of the aggregate results. We provide evidence that political rights are conducive to growth in more advanced sectors of an economy, while they do not matter or have a negative effect on growth in sectors far away from the technological frontier. One channel of explanation goes through the beneficial effects of democracy and political rights on the freedom of entry in markets. Overall, democracies tend to have much lower entry barriers than autocracies, because political accountability reduces the protection of vested interests, and entry in turn is known to be generally more growth-enhancing in sectors that are closer to the technological frontier. We present empirical evidence that supports this entry explanation.
This paper studies the choice of electoral rules, in particular the question of minority representation. Majorities tend to disenfranchise minorities through strategic manipulation of electoral rules. With the aim of explaining changes in electoral rules adopted by US cities, particularly in the South, we show why majorities tend to adopt “winner-take-all” city-wide rules (at-large elections) in response to an increase in the size of the minority when the minority they are facing is relatively small. In this case, for the majority it is more e
Policies are typically chosen by politicians and bureaucrats. This paper investigates first the normative criteria with which to allocate policy tasks to elected policymakers (politicians) or non-elected bureaucrats. Politicians are preferable if there is uncertainty about social preferences and flexibility is valuable, or if policy complementarities and compensation of losers is uncertainty about social preferences and flexibility is valuable, or if policy complementarities and compensation of losers is important. Bureaucrats are preferable if time inconsistency and short-termism is an issue, or if vested interests have large stakes in the policy outcome. We then compare this normative benchmark with the case in which politicians choose when to delegate and show that the two generally differ.
Fiscal policy is procyclical in many developing countries.We explain this policy failure with a political agency problem. Procyclicality is driven by voters who seek to “starve the Leviathan” to reduce political rents. Voters observe the state of the economy but not the rents appropriated by corrupt governments. When they observe a boom, voters optimally demand more public goods or lower taxes, and this induces a procyclical bias in fiscal policy. The empirical evidence is consistent with this explanation: Procyclicality of fiscal policy is more pronounced in more corrupt democracies.
This paper investigates the normative criteria that guide the allocation of a policy task to an elected politician versus an independent bureaucrat. The bureaucrat is preferable for technical tasks for which ability is more important than effort, or if there is great uncertainty about whether the policymaker has the required abilities. The optimal allocation of redistributive tasks is ambiguous, and depends on how the bureaucrat can be instructed. But irrespective of the normative conclusion, the politician prefers not to delegate redistributive policies.
Preferences for redistribution and state intervention in social policies, as well as the generosity of welfare states, differ significantly across countries. In this paper, we test whether there exists a feedback process of the economic regime on individual preferences. We exploit the “experiment” of German separation and reunification to establish exogeneity of the economic system. From 1945 to 1990, East Germans lived under a Communist regime with heavy state intervention and extensive redistribution. We find that, after German reunification, East Germans are more in favor of redistribution and state intervention than West Germans, even after controlling for economic incentives. This effect is especially strong for older cohorts, who lived under Communism for a longer time period. We further find that East Germans’ preferences converge towards those of West Germans. We calculate that it will take one to two generations for preferences to converge completely.
Easier divorce has two effects on marriage rates and fertility. It dilutes the value of marriage, therefore reducing marriage rates and marital fertility and potentially increasing out of wedlock fertility. But easier divorce reduces also the commitment cost of marriage leading women to “try” marriage especially when in child bearing age or even already pregnant. We find that total fertility and out-of-wedlock fertility decline after the introduction of unilateral divorce. Women planning to have children marry more easily with an easier “exit option” from marriage. Thus, more children are born in the first years of marriage, while marital fertility does not change, probably as a result of an increase in divorce and marital instability. Therefore we find strong evidence consistent with the “commitment effect”
Why do countries delay stabilizations of large and increasing budget deficits and inflation? And what explains the timing of reforms? We use the war-of-attrition model to guide our empirical study on a vast sample of countries. We find that stabilizations are more likely to occur when times of crisis occur, when new governments take office, when governments are “strong” (that is, presidential systems and unified governments with a large majority of the party in office), and when the executive branch faces fewer constraints. The role of external inducements like IMF programs has at best a weak effect, but problems of reverse causality are possible.
This paper provides a formal model of endogenous border formation and choice of defense spending in a world with international conflict. We examine both the case of democratic governments and of dictatorships. The model is consistent with three observations. First, breakup of countries should follow a reduction in the likelihood of international conflicts. Second, the number of regional conflicts between smaller countries may increase as a result of the breakup of larger countries. Third, the size of the peace dividend (the reduction in defense spending in a more peaceful world) is limited by the process of country breakup.
We use data on announced and actual exchange rate arrangements to ask which countries follow de facto regimes different from their de iure ones, that is, do not do what they say. Our results suggest that countries with poor institutional quality have difficulty in maintaining pegging and abandon it often. In contrast, many countries with relatively good institutions display fear of floating, that is, they manage more than announced, perhaps to signal their differences from those countries incapable of maintaining promises of monetary stability.
Alesina, Alberto, Alberto Carrasquilla, and Roberto Steiner. 2005. “The Central Bank of Colombia.” Institutional Reforms in Colombia, edited by A Alesina. Cambridge, MA: MIT Press.
Alesina, Alberto, Alberto Carrasquilla, and Juan Jose Echevarria. 2005. “Decentralization in Colombia.” Institutional reforms in Colombia, edited by A Alesina. Cambridge, MA: MIT Press.
Alesina, Alberto, Enrico Spolaore, and Romain Wacziarg. 2005. “Trade, Growth and the Size of Countries.” Handbook of Economic Growth, edited by P Aghion and S Durlauf. 1499-1542: North Holland, Amsterdam.