Power Fluctuations and Political Economy
We study (constrained) Pareto efficient allocations in a dynamic production economy where the group that holds political power decides the allocation of resources. For high discount factors, the economy converges to a first-best allocation where labor supply decisions are not distorted. For low disc...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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Elsevier
2011
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| Online Access: | http://hdl.handle.net/1721.1/61784 https://orcid.org/0000-0003-0908-7491 |
| _version_ | 1826216474207846400 |
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| author | Acemoglu, Daron Golosov, Michael Tsyvinski, Aleh |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Acemoglu, Daron Golosov, Michael Tsyvinski, Aleh |
| author_sort | Acemoglu, Daron |
| collection | MIT |
| description | We study (constrained) Pareto efficient allocations in a dynamic production economy where the group that holds political power decides the allocation of resources. For high discount factors, the economy converges to a first-best allocation where labor supply decisions are not distorted. For low discount factors, distortions do not disappear and fluctuate over time. Most importantly, the set of sustainable first-best allocations is larger when there is less persistence in the identity of the party in power (because this encourages political compromise). This result contradicts the common presumption that there will be fewer distortions when there is a “stable ruling group”. |
| first_indexed | 2024-09-23T16:47:56Z |
| format | Article |
| id | mit-1721.1/61784 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T16:47:56Z |
| publishDate | 2011 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | mit-1721.1/617842022-10-03T08:23:08Z Power Fluctuations and Political Economy Acemoglu, Daron Golosov, Michael Tsyvinski, Aleh Massachusetts Institute of Technology. Department of Economics Acemoglu, Daron Acemoglu, Daron We study (constrained) Pareto efficient allocations in a dynamic production economy where the group that holds political power decides the allocation of resources. For high discount factors, the economy converges to a first-best allocation where labor supply decisions are not distorted. For low discount factors, distortions do not disappear and fluctuate over time. Most importantly, the set of sustainable first-best allocations is larger when there is less persistence in the identity of the party in power (because this encourages political compromise). This result contradicts the common presumption that there will be fewer distortions when there is a “stable ruling group”. National Science Foundation (U.S.) United States. Air Force Office of Scientific Research 2011-03-24T18:19:03Z 2011-03-24T18:19:03Z 2010-11 2010-10 Article http://purl.org/eprint/type/JournalArticle 0022-0531 http://hdl.handle.net/1721.1/61784 Acemoglu, Daron, Mikhail Golosov, and Aleh Tsyvinski. “Power fluctuations and political economy.” Journal of Economic Theory, Volume 146, Issue 3, May 2011, Pages 1009–1041.© 2010 Elsevier Inc. https://orcid.org/0000-0003-0908-7491 en_US http://dx.doi.org/10.1016/j.jet.2010.11.002 Journal of Economic Theory Attribution-Noncommercial-Share Alike 3.0 Unported http://creativecommons.org/licenses/by-nc-sa/3.0/ application/pdf Elsevier MIT web domain |
| spellingShingle | Acemoglu, Daron Golosov, Michael Tsyvinski, Aleh Power Fluctuations and Political Economy |
| title | Power Fluctuations and Political Economy |
| title_full | Power Fluctuations and Political Economy |
| title_fullStr | Power Fluctuations and Political Economy |
| title_full_unstemmed | Power Fluctuations and Political Economy |
| title_short | Power Fluctuations and Political Economy |
| title_sort | power fluctuations and political economy |
| url | http://hdl.handle.net/1721.1/61784 https://orcid.org/0000-0003-0908-7491 |
| work_keys_str_mv | AT acemogludaron powerfluctuationsandpoliticaleconomy AT golosovmichael powerfluctuationsandpoliticaleconomy AT tsyvinskialeh powerfluctuationsandpoliticaleconomy |