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Title: Political Institutions and Economic Growth

Author(s): Laura Marsiliani and Thomas I Renström

Publication Date: February 2007

Keyword(s): bargaining, endogenous growth, overlapping generations, taxation and voting

Programme Area(s): Public Economics

Abstract: We analyze the impact of micro-founded political institutions on economic growth in an overlapping-generations economy, where individuals differ in preferences over a public good (as well as in age). Labour and capital taxes finance the public good and a public input. The benchmark institution is a parliament, where all decisions are taken. Party entry, parliamentary composition, coalition formation, and bargaining are endogenous. We compare this constitution to delegation of decision-making, where a spending minister (elected in parliament or appointed by the largest party). Delegation of decision-making tends to yield lower growth, mainly due to the occurrence of production inefficiency.

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Bibliographic Reference

Marsiliani, L and Renström, T. 2007. 'Political Institutions and Economic Growth'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=6143