We present a theoretical model of a parliamentary democracy, where party structures, government coalitions and fiscal policies are endogenously determined. The model predicts that, relative to proportional elections, majoritarian elections reduce government spending because they reduce party...

This paper presents a model of electoral accountability to compare the public finance outcomes under a presidential-congressional and a parliamentary system. In a presidential-congressional system, contrary to a parliamentary system, there are no endogenous incentives for legislative cohesion,...

A political constitution is like an incomplete contract: it spells out a procedure for making decisions and for delegating power, without specifying the contents of those decisions. This creates a problem: the appointed policymaker could use this power for his own benefit against the interests...

We try to demonstrate how economists may engage in research on comparative politics, relating the size and composition of government spending to the political system. A Downsian model of electoral competition and forward-looking voting indicates that majoritarian---as opposed to...

Does democracy promote economic development? We review recent attempts to addresses this question, which exploit the within-country variation associated with historical transitions in and out of democracy. The answer is positive, but depends - in a subtle way - on the details of democratic...

We study the joint dynamics of economic and political change. Predictions of the simple model that we formulate in the paper get considerable support in a panel of data on political regimes and GDP per capita for about 150 countries over 150 years. Democratic capital - measured by a nation's...

The internal market in Europe will greatly increase the international mobility of resources. How will this affect fiscal policy in different countries? We first consider taxation of capital in a two-country model, where a democratically-chosen government in each country chooses tax policy....

Is inequality harmful for growth? We suggest that it is. In a society where distributional conflict is important, political decisions are likely to produce economic policies that allow private individuals to appropriate less of the returns to activities which promote growth, such as the...

How can monetary policy in stage III of European Monetary Union be coordinated between the ‘ins’ and the ‘outs’? This paper compares alternative institutional mechanisms, and concludes that a generalized system of inflation targets at the European level has several merits: it strengthens...

We estimate the effect of political regime transitions on growth with semi-parametric methods, combining difference in differences with matching, that have not been used in macroeconomic settings. Our semi-parametric estimates suggest that previous parametric estimates may have seriously...