Political Economy in Macroeconomics Book

	Preface	xi
	Introductory Note	xiii
Part I	Basic Issues and Tools of Analysis	1
Chapter 1	What is a Political Economy?	3
1.1.	Introduction	3
1.2.	Politics and Economics	5
1.3.	Types of Heterogeneity	9
1.4.	An Illustration of Approaches	12
1.5.	Plan of the Book	18
Chapter 2	Economic Models for Political Analysis	20
2.1.	Introduction	20
2.2.	The Principal-Agent Problem	22
2.3.	Discrete Time Dynamic Models--Dynamic Programming	31
2.4.	The Overlapping Generations Model	35
2.5.	Effects of Uncertain Future Policies	38
2.6.	Conclusions	58
Chapter 3	Decisionmaking Mechanisms	60
3.1.	Introduction	60
3.2.	How Much Political Detail?	61
3.3.	Choosing Decisionmaking Mechanisms	64
3.4.	Direct Democracy	70
3.5.	Representative Democracy	77
3.6.	Multiparty Systems	85
3.7.	Interest Groups and Lobbying	90
3.8.	Transaction Cost Politics	96
3.9.	Conclusions	98
Part II	Commitment, Credibility, and Reputation	99
Chapter 4	The Time-Consistency Problem	101
4.1.	Introduction	101
4.2.	Capital Taxation	104
4.3.	Time Inconsistency as a Conflict of Interests	110
4.4.	The Barro-Gordon Model	113
4.5.	Seigniorage Revenue and the Optimum Quantity of Money	121
4.6.	Commitment versus Flexibility	126
4.7.	Conclusions	130
Chapter 5	Laws, Institutions, and Delegated Authority	131
5.1.	Introduction	131
5.2.	Laws, Constitutions, and Social Contracts	132
5.3.	Delegation of Authority	140
5.4.	Central Bank Independence	142
5.5.	Fiscal Structures for Time Consistency	157
5.6.	Conclusions	164
Chapter 6	Credibility and Reputation	166
6.1.	Introduction	166
6.2.	Reputation	168
6.3.	"Reputation" under Complete Information	169
6.4.	Reputation under Incomplete Information--Mimicking	175
6.5.	Does Reputation "Solve" the Time-Consistency Problem?--Three Caveats	183
6.6.	Signaling	187
6.7.	Reputation for Not Reneging on Commitments	195
6.8.	Credibility and External Circumstances	201
6.9.	Ambiguity, Secrecy, and Imprecise Control	208
6.10.	Conclusions	214
Part III	Heterogeneity and Conflicting Interests	217
Chapter 7	Elections and Changes of Policymakers	219
7.1.	Introduction	219
7.2.	Elections and Policymaker Performance	223
7.3.	The Opportunistic Political Business Cycle	228
7.4.	Partisan Political Cycles	246
7.5.	Competence and Prospective Voting	268
7.6.	Campaign Promises	278
7.7.	Interactions of the Executive and the Legislature	283
7.8.	Multiparty Systems and Endogenous Election Dates	293
7.9.	Tying the Hands of One's Replacement	300
7.10.	Conclusions	308
Chapter 8	Redistribution	309
8.1.	Introduction	309
8.2.	Redistribution of Income	311
8.3.	Differential Transfers	318
8.4.	Nonmonetary Redistribution	324
8.5.	Rent Seeking and Predation	334
8.6.	Intergenerational Redistribution	345
8.7.	Redistribution and Mobility	354
8.8.	Conclusions	370
Chapter 9	Public Goods	372
9.1.	Introduction	372
9.2.	Public Goods--The Neoclassical Approach	375
9.3.	Provision of Public Goods in Practice	379
9.4.	Voluntary Provision of Public Goods--Free Riders and Collective Action	382
9.5.	Voluntary Provision of Public Goods--Clubs	391
9.6.	The Static Public Goods Game	395
9.7.	The War of Attrition in Public Goods Provision	397
9.8.	Conclusions	401
Chapter 10	Inaction, Delay, and Crisis	403
10.1.	Introduction	403
10.2.	Economic Arguments	407
10.3.	Vested Interests	411
10.4.	Nonadoption Due to Uncertainty about Individual Benefits	414
10.5.	"Communication" Failures	423
10.6.	Conflict over the Burden of Reform	432
10.7.	Common Property Models	439
10.8.	Economic Crises	444
10.9.	Conclusions	454
Part IV	Application to Policy Issues	455
Chapter 11	Factor Accumulation and Growth	457
11.1.	Introduction	457
11.2.	Basic Models of Fiscal Policy and Capital Accumulation	461
11.3.	Imperfect Capital Markets, Externalities, and Endogenous Income Distribution	474
11.4.	Political Institutions and Regimes	488
11.5.	Socio-Political Instability	500
11.6.	Empirical Determinants of Growth	513
11.7.	Conclusions	524
Chapter 12	The International Economy	526
12.1.	Introduction	526
Part I	Exchange-Rate Arrangements	529
12.2.	Fixed versus Flexible Exchange Rates	529
12.3.	Currency Crises and Contagious Speculative Attacks	536
12.4.	Monetary Unions	544
Part II	Macroeconomic Interdependence	559
12.5.	International Policy Cooperation	559
12.6.	Political Responses to External Shocks	579
Part III	International Capital and Aid Flows	580
12.7.	Capital Controls	580
12.8.	Sovereign Borrowing	587
12.9.	Foreign Aid	601
12.10.	Conclusions	613
Chapter 13	Economic Reform and Transition	615
13.1.	Introduction	615
13.2.	Defining the Issues	617
13.3.	Economic and Political Constraints	621
13.4.	The Implications of Magnitude--A Formal Analysis	626
13.5.	Heterogeneity and Political Constraints	632
13.6.	Labor Reallocation	643
13.7.	Privatization	653
13.8.	Price Liberalization	663
13.9.	Conclusions	674
Chapter 14	The Size of Government and the Number of Nations	675
14.1.	Introduction	675
14.2.	The Scope of Government	677
14.3.	The Size of Government--Government Spending	679
14.4.	Government Debt and Deficits	690
14.5.	Budgetary Rules and Institutions	697
14.6.	The Number of Nations	707
14.7.	Conclusions	731
	Bibliography	735
	Author Index	765
	Subject Index	771