Political institutions and economic growth

• Main Author: Rebollo, Diego Aboal
• Published: University of Essex 2009
• Subjects: 338.9
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.504878

Electoral systems are rules trough which votes translate into seats in parliament. The political economy literature tells us that alternative electoral systems can generate different distributions of power among different social groups in the legislature and therefore lead to dissimilar equilibrium economic policies~ On the other hand, we know from the endogenous economic growth literature that economic policy can affect growth. vVhat the literature is lacking is a clear link between electoral systems and economic growth. The main objective of this thesis is to establish a connection between them. Once this link is constructed we move our focus to a more primitive question: what are the factors that determine which electoral system is chosen over another? Providing an answer to this question is the second objective of the thesis. We build a dynastic model with heterogeneous agents where one of the engines of growth is public capital. In our model there are three social classes with different levels of wealth and productivity. The source of conflict among these social classes is the level of public capital. Alternative electoral systems can generate different distributions of power in parliament and different equilibrium levels of public capital. Different patterns of capital accumulation lead to different economic growth equilibrium. Social classes who are' aware that alternative electoral systems imply different public policy and welfare choose an electoral system following a simple process of bargaining. A precise ranking of electoral systems in terms of economic growth requires the knowledge of the social structure of the country. Alternative social structures can lead to different rankings. Under complete enfranchisement, equal and not polarized societies choose majoritarian electoral systems, while equal but polarized societies generate proportional representation systems. Only highly unequal societies can lead to anarchy. The empirical evidence supports some of the propositions of the thesis.