Discussion Paper Details

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Title: Wedges: Distribution, Distortions, and Market Integration

Author(s): Giuseppe Bertola

Publication Date: April 2017

Keyword(s): Capital mobility. and Policy competition

Programme Area(s): Macroeconomics and Growth

Abstract: This paper proposes a stylized model of policy determination and imperfect international integration. A policy wedge aims to correct laissez-faire market imperfections and/or redistribute welfare across heterogeneous agents. Policy is subject to both race-to-the-bottom and beggar-thy-neighbor forces if the country's politico-economic equilibrium interacts with the rest of the world. Variation of international market wedges induces patterns of country-specific regulation and deregulation that depend on political and structural features in non-obvious, intuitive, and empirically realistic ways.

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Bibliographic Reference

Bertola, G. 2017. 'Wedges: Distribution, Distortions, and Market Integration'. London, Centre for Economic Policy Research.