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Political institutions and economic growth

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Abstract

We analyze the impact of micro-founded political institutions on economic growth in an overlapping-generations economy, where individuals differ in preferences over a public good (as well as in age). Labour- and capital taxes finance the public good and a public input. The benchmark institution is a parliament, where all decisions are taken. Party entry, parliamentary composition, coalition formation, and bargaining are endogenous. We compare this constitution to delegation of decisionmaking, where a spending minister (elected in parliament or appointed by the largest party). Delegation of decisionmaking tends to yield lower growth, mainly due to the occurrence of production inefficiency.

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Authors and Affiliations

  1. University of Durham and CEPR, 23–26 Old Elvet, Durham, DH1 3HY, UK

    Laura Marsiliani & Thomas I. Renström

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  1. Laura Marsiliani
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  2. Thomas I. Renström
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Correspondence to Thomas I. Renström.

Additional information

We wish to thank an anonymous referee, Toke Aidt, Roger Congleton, Avinash Dixit, Mike Felgenhauer, Pohan Fong, Piergiuseppe Fortunato, Arye Hillman, Stan Winer, and seminar participants at Southampton; Warwick; IIES, Stockholm; and participants at the Conference on Economic Growth and Distribution, Lucca, 2004; the Annual Meeting of the European Public Choice Society, Durham, 2005; the Midwest Macroeconomics Meetings, Iowa, 2005; the IIPF Congress, Jeju, 2005; the Money, Macro and Finance Research Group Conference, Rethymno, 2005; the WZB Conference, Berlin, 2005; and the North American Summermeeting of the Econometric Society, Minneapolis, 2006.

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Marsiliani, L., Renström, T.I. Political institutions and economic growth. Economics of Governance 8, 233–261 (2007). https://doi.org/10.1007/s10101-007-0038-z

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