Can a growing welfare state induce a regime switch in the growth rate of an economy? This paper constructs a dynamic political economy model of economic growth and the welfare state in which both variables are nonlinearly related and jointly endogenous. Using a Markov switching framework over the period 1950-2001, we find that the structural decline in growth rates that several welfare state economies ...
We study the political economy of commuting subsidies in a model of a monocentric city with two income classes. Depending on housing demand and transport costs, either the rich or the poor live in the central city and the other group in the suburbs. Commuting subsidies increase the net income of those with long commutes or high transport costs. They also affect land rents and therefore the income of ...
In this paper a dynamic bi-factor model with Markov-switching is developed to measure and predict turning points. Both common factors, namely composite leading index (CLI) and composite coincident index (CCI) respectively, have their own cyclical dynamics, and their lead-lag relationships are reflected in the transition probabilities matrix. The model is applied to four coincident and four selected ...
Environmental policies frequently target the ratio of dirty to green output within the same industry. To achieve such targets, the green sector may be subsidized or the dirty sector be taxed. We show that in a monopolistic competition setting, the two policy approaches have different welfare effects, depending on the design of the instrument (ad valorem versus unit instrument) and the initial situation ...
Drawing on panel data from the European Community Household Panel (ECHP), the British Household Panel Survey (BHPS) and the German Socio-Economic Panel Study (SOEP), we compare the economic performance of immigrants to Great Britain, West Germany, Denmark, Luxembourg, Ireland, Italy, Spain and Austria to that of the respective indigenous population. The unit of analysis is the individual in the household ...
Soft budget constraints (SBCs) are a persistent feature of transition economies and have been blamed for a lack of fiscal consolidation and sluggish growth. EU eastward enlargement has been conditioned on tackling SBCs. This paper analyzes such outside conditionality theoretically and empirically. First, by modeling the SBC problem as a war of attrition between the applicant countries' governments ...
