U.S. government expenditures increased rapidly during the post-war period, then slowed in the 1980s and began falling in 1992. To examine the dynamics of the growth and subsequent reduction in government spending, we present a dynamic general equilibrium model in which politicians choose...

In high-tech industries, one important method of diffusion is through employee mobility: many of the entering firms are started by employees from incumbent firms using some of their former employers' technological know-how. This paper explores the effect of incorporating this mechanism in a...

The response of the ten new eastern members of the European Union to the global financial crisis has valuable lessons of crisis resolution for the euro area. These countries were severely hit by the crisis in the fall of 2008 and responded with extensive reforms. Crisis made the unthinkable...

We examine how electoral motives influence active labor market policies that promote (short term) job-creation. Such policies reduce measures of unemployment. Using German state data for the period 1985 to 2004, we show that election-motivated politicians pushed jobpromotion schemes before...

This study deals with important issues related to the new political macroeconomics and its appliance to the economic movements in Serbia, which is a country of “new democracy” as well as with transition economy. In political macroeconomics, it is a known fact that the economic policy...

This paper examines how electoral motives and government ideology influence active labor market policies (ALMP). We present a model that explains how politicians strategically use ALMP to generate political cycles in unemployment and the budget deficit. Election-motivated politicians increase...

We describe the evolution of selective aspects of punishment in the US over the period 1980-2004. We note that imprisonment increased around 1980, a period that coincides with the "Reagan revolution" in economic matters. We build an economic model where beliefs about economic opportunities and...

Predominant views on the political economy of Latin America and the Caribbean tend to emphasize that elite domination helps to understand the high levels of inequality. The contemporary fiscal version of that assertion goes something like “the rich are powerful and they dont like taxes, hence...

This paper surveys the sovereign debt literature and summarizes the political economy trade-offs of seven distinct mechanisms for achieving debt sustainability. Two mechanisms – financial aid and asset exchange – are often underemphasized or entirely overlooked even though they can play an...

If people understand that some macroeconomic policies are unsustainable, why would they vote for them in the first place? We develop a political economy theory of the endogenous emergence of fiscal crises, based on the idea that the adjustment mechanism to a crisis favors some social groups,...