Finite horizons, political economy, and growth

James A Kahn () and Jong-Soo Lim

No 102, Staff Reports from Federal Reserve Bank of New York

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 (that is, 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.

Keywords: Economic development; Political science; Expenditures, Public (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-dev and nep-dge
Date: 2000
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Related works:
Working Paper: Finite Horizons, Political Economy, and Growth (1996)
Journal Article: Finite Horizons, Political Economy, and Growth (2001)
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