Finite Horizons, Political Economy, and Growth

James A Kahn () and Jong-Soo Lim
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Jong-Soo Lim: Kwangwoon University

Review of Economic Dynamics, 2001, vol. 4, issue 1, pages 1-25

Abstract: This paper analyzes the political economy of growth when agents and the government have finite horizons and equilibrium growth is inefficient. A "representative" government (i.e. one whose preferences reflect those of its constituents) endowed merely with the ability to tax and transfer can improve somewhat on the market allocation, but cannot achieve first-best growth. Efficiency requires in addition the ability to bind future governments. We argue that this ability is related to political stability, and provide empirical evidence that stability and growth-related policies (namely education) are meaningfully related. (Copyright: Elsevier)

Keywords: growth; political instability; political economy; education; Markov equilibrium (search for similar items in EconPapers)
JEL-codes: D9 H3 O5 (search for similar items in EconPapers)
Date: 2001
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Related works:
Working Paper: Finite horizons, political economy, and growth (2000)
Working Paper: Finite Horizons, Political Economy, and Growth (1996)
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