Politico-economic equivalence

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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 languageEnglish
JournalReview of Economic Dynamics
Issue number4
Pages (from-to)843-862
Number of pages20
Publication statusPublished - Oct 2015

Bibliographical note

JEL Classification: E62, H55, H63

    Research areas

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

ID: 143185614