Politico-economic equivalence

Martin Gonzalez Eiras; Dirk Niepelt

doi:10.1016/j.red.2015.08.001

Politico-economic equivalence

6 Citations (Scopus)

Abstract

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.

Original language	English
Journal	Review of Economic Dynamics
Volume	18
Issue number	4
Pages (from-to)	843-862
Number of pages	20
ISSN	1094-2025
DOIs	https://doi.org/10.1016/j.red.2015.08.001
Publication status	Published - Oct 2015

Keywords

Faculty of Social Sciences
Equivalence
Politico-economic equilibrium
Tax policy
Government debt
Social security reform

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10.1016/j.red.2015.08.001

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title = "Politico-economic equivalence",

abstract = "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.",

keywords = "Faculty of Social Sciences, Equivalence, Politico-economic equilibrium, Tax policy, Government debt, Social security reform",

author = "{Gonzalez Eiras}, Martin and Dirk Niepelt",

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year = "2015",

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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

SN - 1094-2025

VL - 18

SP - 843

EP - 862

JO - Review of Economic Dynamics

JF - Review of Economic Dynamics

IS - 4

ER -

Politico-economic equivalence

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Keywords

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