Policies of different governments : persistence and interactions

This dissertation consists of three chapters on persistence and interactions of policies of different governments in various settings. Chapter 1 studies government policy persistence when firms face capital installation costs. In an environment, where the government is either left- or right-wing, the left-wing government almost always sets more right-wing policies when it follows a conservative administration than otherwise. Similarly, when the types of policy makers are close enough to each other, a right-wing government that succeeds a leftist one chooses more left-wing policies. However, when the preferences of the politicians are sufficiently different, a conservative government selects more right-wing fiscal policies when following a leftist administration in order to address the state of the economy it inherits. Chapter 2 considers the political implications of tax competition between countries of different sizes. Smaller countries competing for internationally mobile capital set lower tax rates than their larger counterparts. This is because they perceive higher elasticity of capital with respect to their policy and their governments are to the right of those elected in larger countries. Then a more significant number of small countries involved in the competition with large countries not only decreases the large-country tax rates on capital, but also shifts their governments to the right. Large countries do not have a similar "right-wing" power and the presence of more of them in a competition can actually cause a left-ward shift in the governments of the competitors.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Economics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2008

Author dc:creator

• Ricka, Frantisek

Advisor dc:contributor.advisor

• Guido Lorenzoni and Francesco Giavazzi.

• Economics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/45901

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/45901