Political Economy

Objective

This course offers a comprehensive overview of the field of political economics. We will introduce game theoretic models that will be used to understand how politicians’ motivations affect public-policy decisions. The course will start with the introduction to the toolbox of political economics. It will then apply these tools to important topics in political economy: redistribution, comparative politics, and debt.  In the second part of the course, particular emphasis will be given to the interaction between political incentives and macroeconomic policies.

Planning

Chapter 1: Tools of political economics (Electoral competition, Agency Models of Election, Partisan Politicians, Legislative Bargaining, Probabilistic Voting, Interest-groups)
Chapter 2: Redistributive politics and Public Good Provision (Median Voter Models, Divide the dollar game)
Chapter 3: Comparative Politics (Electoral Rules and Electoral Competition)
Chapter 4: Dynamic Political Economy (Fiscal and Monetary Policy, Government Debt, Legal and Fiscal Capacity, Welfare State Dynamics)

References

MAIN REFERENCES

• Acemoglu D. and J. Robinson, 2006. Economic origins of dictatorship and democracy. Cambridge University Press.
• Austen-Smith David and Jeffrey Banks 2005 Positive Political Theory I and II University of Michigan Press
• Besley, T., 2006. Principled Agents Oxford University Press.
• Besley, T and T. Persson, 2011. Pillars of Prosperity. Princeton University Press.
•  Grossman G. and E. Helpman, 2001. Special interest politics. MIT Press
• Drazen, A., 2000. Political Economy in Macroeconomics. Princeton University Press.
• Persson, T. and G. Tabellini, 2000. Political Economics: Explaining Economic Policy. MIT Press.
• Persson, T. and G. Tabellini, 2003. The economic effects of constitutions. MIT Press.

LEGISLATIVE BARGAINING 

• Austen-Smith David and Jeffey S. Banks, 2005, Positive Political Theory II Strategy and Structure 
• Banks and Duggan, 2006, A General Bargaining Model of Legislative Policy-making. Quarterly Journal of Political Science
• Baron, D.P., & Ferejohn, J.A., 1989, Bargaining in legislatures. American Political Science Review
• Baron, David, 1996. A Dynamic Theory of Collective Good Programs, APSR.
• Bernheim Douglas , Antonio Rangel and Luis Rayo, 2006, The Power of the Last Word in Legislative Policy Making Econometrica
• Bowen Renee, Ying Chen and Hulya Eraslan, 2014, Mandatory Versus Discretionary Spending: the Status Quo Effect, American Economic Review
• Dziuda, W. and A. Loeper, 2015, Dynamic Collective Choice with Endogenous Status Quo. The Journal of Political Economy
• Piguillem, Riboni, 2015 Spending Biased Legislators: Discipline Through Disagreement Quarterly Journal of Economics
• Riboni, A. and F. Ruge-Murcia, 2008. The Dynamic (In)efficiency of Monetary Policy by Committee. Journal of Money, Credit, and Banking

DEMOCRATIZATION

• Acemoglu and Robinson, Economic Origin of Dictatorship and Democracy. Ch. 5.6 Cambridge University Press
• Acemoglu, Political Economy Lecture Notes (ch 18) MIT
• Lizzeri and Persico, 2004, Why did the elite extend the suffrage? Democracy and the scope of government with an applications of Britain's age of reform, QJE
• Acemoglu et al. 2015 Democracy, Redistribution and Inequality, Handbook Income Distribution
• Bruckner and Ciccone, 2011, Rain and the Democratic Window of Opportunity, Econometrica

STATE BUILDING

• Besley, Timothy, and Torsten Persson. 2011. Section 2.1 Pillars of Prosperity. Princeton University Press
• Acemoglu Robinson, 2017, The emergence of Weak, Dispotic and Inclusive States, wp, MIT, video
• Sanchez de la Sierra, 2019, On the origin of the states: stationary bandits and taxation in Eastern Congo, Journal of Political Economy
• Johnson and Koyama, 2017, States and Economic Growth: Capacity and Constraints, Explorations in Economic History
• Dell, Lane, Querubin, 2018, The Historical State, Local Collective Action and Economic Development in Vietman, Econometrica

CULTURE & INSTITUTIONS

• Alesina and Giuliano, 2015 Culture and Institutions 
• Lowes, Nunn, Robinson, Weigel, 2017. The evolution of culture and institution: evidence from the Kuba Kingdom, Econometrica
• Tabellini Guido 2008 The Scope of Cooperation, Value and Incentives, QJE

IDENTITY POLITICS & POLITICAL POLARIZATION

• Alesina, Reich, Riboni, 2017, Nationalism, Nation Building and Wars, mimeo
• Alesina, Tabellini, Trebbi, 2017, Is Europe an Optimal Political Area, Brookings Papers on Economic Activity
• Alesina, Stantcheva Teso, 2019, Intergenerational Mobility and Preference for Redistribution, AER
• Alesina, Miano, Stantcheva, 2019, The Polarization of Reality, mimeo
• Shayo, 2009, A Model of Social Identity with an Application to Political Economy, APSR
• Shayo, 2019 Social Identity and Economic Policy
• Gennaioli and Tabellini 2018, Identity, Beliefs and Political Conflict, mimeo slides
• Noury and Roland, 2019 Identity Politics and Populism in Europe, Berkely, mimeo
• Tajfel and Turner, 1986, The social identity theory of intergroup behavior