Research output: Contribution to journal › Journal article › Research › peer-review
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.
|Journal||Review of Economic Dynamics|
|Number of pages||20|
|Publication status||Published - Oct 2015|
JEL Classification: E62, H55, H63
- Faculty of Social Sciences - Equivalence, Politico-economic equilibrium, Tax policy, Government debt, Social security reform