Most economic choices are taken within the context of government policy and regulation. Investment decisions depend on corporate tax rates, labor supply decisions depend on labor tax rates, imports and exports are subject to tariffs and quotas, fiscal policy is a complex bargain among delegates from different regions. These public policies are the result of heterogeneous interests that, mediated by political institutions, produce a public choice that ultimately affects the choices available to economic agents. Different political structures produce different public policies. By this causal chain, economic activity depends on political organization.
In this course we will study the effects of politics and political institutions on economic decisions and outcomes using game theoretic models that combine political and economic choices. Topics may include electoral business cycles, capital taxation and growth, inequality and redistribution, deficits and public debt, electoral rules and accountability, Congressional bargaining and regional transfers, size of the government sector, inflation targeting, the importance of credibility. |