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Why was the Black Death followed by the decline of serfdom in Western Europe but its' intensification in Eastern Europe? What explains why involvement in Atlantic trade in the Early Modern period was positively correlated with economic growth in Britain but negatively correlated in Spain? Why did frontier expansion in the 19th Century Americas go along with economic growth in the United States and economic decline in Latin America? Why do natural resource booms seem to stimulate growth in some countries, but lead to a 'curse' in others, and why does foreign aid sometimes seem to encourage, other times impede economic growth? In this paper we argue that the response of economies to shocks or innovations in economic opportunities depends on the nature of institutions. When institutions are strong, new opportunities or windfalls can have positive effects. But when institutions are weak they can have negative effects. We present a simple model to illustrate how comparative statics are conditional on the nature of institutions and show how this perspective helps to unify a large number of historical episodes and empirical studies.

Zonder onderwerpscode: economie

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Zonder onderwerpscode: economie

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Voters often dismantle constitutional checks and balances on the executive. If such checks and balances limit presidential abuses of power and rents, why do voters support their removal? We argue that by reducing politician rents, checks and balances also make it cheaper to bribe or influence politicians through non-electoral means. In weakly-institutionalized polities where such non-electoral influences, particularly by the better organized elite, are a major concern, voters may prefer a political system without checks and balances as a way of insulating politicians from these influences. When they do so, they are effectively accepting a certain amount of politician (presidential) rents in return for redistribution. We show that checks and balances are less likely to emerge when (equilibrium) politician rents are low; when the elite are better organized and are more likely to be able to influence or bribe politicians; and when inequality and potential taxes are high (which makes redistribution more valuable to the majority). We show that the main intuition, that checks and balances, by making politicians “cheaper to bribe,” are potentially costly to the majority, is valid under different ways of modeling the form of checks and balances.

Zonder onderwerpscode: economie

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We provide a potential explanation for the absence of, and unwillingness to create, centralized power in the hands of a national state based on the political agenda effect. State centralization induces citizens of different backgrounds, interests, regions or ethnicities to coordinate their demands in the direction of more general-interest public goods, and away from parochial transfers. This political agenda effect raises the effectiveness of citizen demands and induces them to increase their investments in conflict capacity. In the absence of state centralization, citizens do not necessarily band together because of another force, the escalation effect, which refers to the fact that elites from different regions will join forces in response to the citizens doing so. Such escalation might hurt the citizen groups that have already solved their collective action problem (though it will benefit others). Anticipating the interplay of the political agenda and escalation effects, under some parameter configurations, political elites strategically opt for a non-centralized state. We show how the model generates non-monotonic comparative statics in response to the increase in the value or effectiveness of public goods (so that centralized states and public good provision are absent precisely when they are more beneficial for society). We also suggest how the formation of a social democratic party may sometimes induce state centralization (by removing the commitment value of a non-centralized state), and how elites may sometimes prefer partial state centralization.

Zonder onderwerpscode: economie

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Zonder onderwerpscode: economie