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Political Economy in Macroeconomics : International Studen - Allan Drazen

Political Economy in Macroeconomics

International Studen

Paperback Published: 15th January 2002
ISBN: 9780691092577
Number Of Pages: 792

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Originally, economics was called political economy, and those studying it readily accepted that economic decisions are made in a political world. But economics eventually separated itself from politics to pursue rigorous methods of analyzing individual behavior and markets. Recently, an increasing number of economists have turned their attention to the old question of how politics shape economic outcomes. To date, however, this growing literature has lacked a cogent organization and a unified approach. Here, in the first full-length examination of how political forces affect economic policy decisions, Allan Drazen provides a systematic treatment, organizing the increasingly influential "new political economy" as a more established field at the highly productive intersection of economics and political science.

Although he provides an extraordinarily helpful guide to the recent explosion of papers on political economy in macroeconomics, Drazen moves far beyond survey, giving definition and structure to the field. He proposes that conflict or heterogeneity of interests should be the field's essential organizing principle, because political questions arise only when people disagree over which economic policies should be enacted or how economic costs and benefits should be distributed. Further, he illustrates how heterogeneity of interests is crucial in every part of political economy. Drazen's approach allows innovative treatment--using rigorous economic models--of public goods and finance, economic growth, the open economy, economic transition, political business cycles, and all of the traditional topics of macroeconomics.

This major text will have an enormous impact on students and professionals in political science as well as economics, redefining how decision makers on several continents think about the full range of macroeconomic issues and informing the approaches of the next generation of economists.

Winner of the 2000 Award for Best Professional/Scholarly Book in Economics, Association of American Publishers "Very well written and concise... Highly recommend[ed] ... to any student interested in political economy."--Gilles Saint-Paul, Journal of Economic Literature "[A] magnificent new book... Drazen's book has established the benchmark for years to come, in terms of both coverage and depth of critical assessment... This is a book you will want on your shelf."--Leonardo Bartolini, Journal of International Economics

Prefacep. xi
Introductory Notep. xiii
Basic Issues and Tools of Analysisp. 1
What is a Political Economy?p. 3
Introductionp. 3
Politics and Economicsp. 5
Types of Heterogeneityp. 9
An Illustration of Approachesp. 12
Plan of the Bookp. 18
Economic Models for Political Analysisp. 20
Introductionp. 20
The Principal-Agent Problemp. 22
Discrete Time Dynamic Models--Dynamic Programmingp. 31
The Overlapping Generations Modelp. 35
Effects of Uncertain Future Policiesp. 38
Conclusionsp. 58
Decisionmaking Mechanismsp. 60
Introductionp. 60
How Much Political Detail?p. 61
Choosing Decisionmaking Mechanismsp. 64
Direct Democracyp. 70
Representative Democracyp. 77
Multiparty Systemsp. 85
Interest Groups and Lobbyingp. 90
Transaction Cost Politicsp. 96
Conclusionsp. 98
Commitment, Credibility, and Reputationp. 99
The Time-Consistency Problemp. 101
Introductionp. 101
Capital Taxationp. 104
Time Inconsistency as a Conflict of Interestsp. 110
The Barro-Gordon Modelp. 113
Seigniorage Revenue and the Optimum Quantity of Moneyp. 121
Commitment versus Flexibilityp. 126
Conclusionsp. 130
Laws, Institutions, and Delegated Authorityp. 131
Introductionp. 131
Laws, Constitutions, and Social Contractsp. 132
Delegation of Authorityp. 140
Central Bank Independencep. 142
Fiscal Structures for Time Consistencyp. 157
Conclusionsp. 164
Credibility and Reputationp. 166
Introductionp. 166
Reputationp. 168
"Reputation" under Complete Informationp. 169
Reputation under Incomplete Information--Mimickingp. 175
Does Reputation "Solve" the Time-Consistency Problem?--Three Caveatsp. 183
Signalingp. 187
Reputation for Not Reneging on Commitmentsp. 195
Credibility and External Circumstancesp. 201
Ambiguity, Secrecy, and Imprecise Controlp. 208
Conclusionsp. 214
Heterogeneity and Conflicting Interestsp. 217
Elections and Changes of Policymakersp. 219
Introductionp. 219
Elections and Policymaker Performancep. 223
The Opportunistic Political Business Cyclep. 228
Partisan Political Cyclesp. 246
Competence and Prospective Votingp. 268
Campaign Promisesp. 278
Interactions of the Executive and the Legislaturep. 283
Multiparty Systems and Endogenous Election Datesp. 293
Tying the Hands of One's Replacementp. 300
Conclusionsp. 308
Redistributionp. 309
Introductionp. 309
Redistribution of Incomep. 311
Differential Transfersp. 318
Nonmonetary Redistributionp. 324
Rent Seeking and Predationp. 334
Intergenerational Redistributionp. 345
Redistribution and Mobilityp. 354
Conclusionsp. 370
Public Goodsp. 372
Introductionp. 372
Public Goods--The Neoclassical Approachp. 375
Provision of Public Goods in Practicep. 379
Voluntary Provision of Public Goods--Free Riders and Collective Actionp. 382
Voluntary Provision of Public Goods--Clubsp. 391
The Static Public Goods Gamep. 395
The War of Attrition in Public Goods Provisionp. 397
Conclusionsp. 401
Inaction, Delay, and Crisisp. 403
Introductionp. 403
Economic Argumentsp. 407
Vested Interestsp. 411
Nonadoption Due to Uncertainty about Individual Benefitsp. 414
"Communication" Failuresp. 423
Conflict over the Burden of Reformp. 432
Common Property Modelsp. 439
Economic Crisesp. 444
Conclusionsp. 454
Application to Policy Issuesp. 455
Factor Accumulation and Growthp. 457
Introductionp. 457
Basic Models of Fiscal Policy and Capital Accumulationp. 461
Imperfect Capital Markets, Externalities, and Endogenous Income Distributionp. 474
Political Institutions and Regimesp. 488
Socio-Political Instabilityp. 500
Empirical Determinants of Growthp. 513
Conclusionsp. 524
The International Economyp. 526
Introductionp. 526
Exchange-Rate Arrangementsp. 529
Fixed versus Flexible Exchange Ratesp. 529
Currency Crises and Contagious Speculative Attacksp. 536
Monetary Unionsp. 544
Macroeconomic Interdependencep. 559
International Policy Cooperationp. 559
Political Responses to External Shocksp. 579
International Capital and Aid Flowsp. 580
Capital Controlsp. 580
Sovereign Borrowingp. 587
Foreign Aidp. 601
Conclusionsp. 613
Economic Reform and Transitionp. 615
Introductionp. 615
Defining the Issuesp. 617
Economic and Political Constraintsp. 621
The Implications of Magnitude--A Formal Analysisp. 626
Heterogeneity and Political Constraintsp. 632
Labor Reallocationp. 643
Privatizationp. 653
Price Liberalizationp. 663
Conclusionsp. 674
The Size of Government and the Number of Nationsp. 675
Introductionp. 675
The Scope of Governmentp. 677
The Size of Government--Government Spendingp. 679
Government Debt and Deficitsp. 690
Budgetary Rules and Institutionsp. 697
The Number of Nationsp. 707
Conclusionsp. 731
Bibliographyp. 735
Author Indexp. 765
Subject Indexp. 771
Table of Contents provided by Syndetics. All Rights Reserved.

ISBN: 9780691092577
ISBN-10: 0691092575
Series: International Studen
Audience: Tertiary; University or College
Format: Paperback
Language: English
Number Of Pages: 792
Published: 15th January 2002
Publisher: Princeton University Press
Country of Publication: US
Dimensions (cm): 24.9 x 16.8  x 5.3
Weight (kg): 1.17