Politico-economic equivalence
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Politico-economic equivalence. / Gonzalez Eiras, Martin; Niepelt, Dirk.
In: Review of Economic Dynamics, Vol. 18, No. 4, 10.2015, p. 843-862.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Politico-economic equivalence
AU - Gonzalez Eiras, Martin
AU - Niepelt, Dirk
N1 - JEL Classification: E62, H55, H63
PY - 2015/10
Y1 - 2015/10
N2 - Traditional "economic equivalence'' results, like the Ricardian equivalence proposition, define equivalence classes over exogenous policies. We derive "politico-economic equivalence" conditions that apply in environments where policy is endogenous and chosen sequentially. A policy regime and a state are equivalent to another such pair if both pairs give rise to the same allocation in politico-economic equilibrium. The equivalence conditions help to identify factors that render institutional change non-neutral and to construct politico-economic equilibria in new policy regimes. We exemplify their use in the context of several applications, relating to social security reform, tax-smoothing policies and measures to correct externalities.
AB - Traditional "economic equivalence'' results, like the Ricardian equivalence proposition, define equivalence classes over exogenous policies. We derive "politico-economic equivalence" conditions that apply in environments where policy is endogenous and chosen sequentially. A policy regime and a state are equivalent to another such pair if both pairs give rise to the same allocation in politico-economic equilibrium. The equivalence conditions help to identify factors that render institutional change non-neutral and to construct politico-economic equilibria in new policy regimes. We exemplify their use in the context of several applications, relating to social security reform, tax-smoothing policies and measures to correct externalities.
KW - Faculty of Social Sciences
KW - Equivalence
KW - Politico-economic equilibrium
KW - Tax policy
KW - Government debt
KW - Social security reform
U2 - 10.1016/j.red.2015.08.001
DO - 10.1016/j.red.2015.08.001
M3 - Journal article
VL - 18
SP - 843
EP - 862
JO - Review of Economic Dynamics
JF - Review of Economic Dynamics
SN - 1094-2025
IS - 4
ER -
ID: 143185614