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Dynamic Stability and Reform of Political Institutions

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Author Info
Roger Lagunoff (Georgetown University)

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Abstract

This paper studies dynamic, endogenous institutional change. We introduce the class of dynamic political games (DPGs), dynamic games in which future political aggregation rules are decided under current ones, and the resulting institutional choices do not affect payoffs or technology directly. A companion paper (Lagunoff (2005b)) establishes existence of Markov Perfect equilibria of dynamic political games. The present paper examines issues of stability and reform when such equilibria exist. Which environments tend toward institutional stability? Which tend toward reform? We show that when political rules are dynamically consistent and private sector decisions areinessential,reform never occurs: all political rules are stable. Roughly,private sector decisions are inessential if any feasible ``social' continuation payoff can achieved by public sector decisions alone. More generally, we identify sufficient conditions for stability and reform in terms of recursive self selection and recursive self denial,incentive compatibility concepts that treat the rules themselves as ``players' who can strategically delegate future policy-making authority to different institutional types. These ideas are illustrated in an example of dynamic public goods provision.

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Paper provided by EconWPA in its series Game Theory and Information with number 0505006.

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Length: 33 pages
Date of creation: 12 May 2005
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Handle: RePEc:wpa:wuwpga:0505006

Note: Type of Document - pdf; pages: 33
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Related research
Keywords: Recursive; dynamic political games; institutional reform; stability; dynamically consistent rules; inessential; recursive self selection.;

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Find related papers by JEL classification:
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hassler, John & Krusell, Per & Storesletten, Kjetil & Zilibotti, Fabrizio, 2005. "The dynamics of government," Journal of Monetary Economics, Elsevier, vol. 52(7), pages 1331-1358, October. [Downloadable!] (restricted)
  2. William Jack & Roger Lagunoff, 2003. "Dynamic Enfranchisement," Levine's Bibliography 666156000000000030, UCLA Department of Economics. [Downloadable!]
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  3. Krusell, Per & Kuruscu, Burhanettin & Smith Jr., Anthony A, 2001. "Equilibrium Welfare and Government Policy with Quasi-Geometric Discounting," CEPR Discussion Papers 2693, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Justman, Moshe & Gradstein, Mark, 1999. "The Industrial Revolution, Political Transition, and the Subsequent Decline in Inequality in 19th-Century Britain," Explorations in Economic History, Elsevier, vol. 36(2), pages 109-127, April. [Downloadable!] (restricted)
  5. Bernheim & Slavov, 2009. "A Solution Concept for Majority Rule in Dynamic Settings," Review of Economic Studies, Blackwell Publishing, vol. 76(1), pages 33-62, 01. [Downloadable!] (restricted)
  6. Daron Acemoglu & James A. Robinson, 2000. "Why Did The West Extend The Franchise? Democracy, Inequality, And Growth In Historical Perspective," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1167-1199, November. [Downloadable!] (restricted)
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  7. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February. [Downloadable!] (restricted)
  8. Paul Klein & Per Krusell & José-Víctor Ríos-Rull, 2004. "Time-Consistent Public Expenditures," Levine's Bibliography 122247000000000652, UCLA Department of Economics. [Downloadable!]
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  9. Philippe Aghion & Alberto Alesina & Francesco Trebbi, 2002. "Endogenous Political Institutions," NBER Working Papers 9006, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Banks, Jeffrey S. & Duggan, John, 2003. "A Social Choice Lemma on Voting over Lotteries with Applications to a Class of Dynamic Games," Working Papers 1163, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  11. Barbera, S. & Maschler, M. & Shalev, J., 2001. "Voting for Voters: A Model of Electoral Evolution," Games and Economic Behavior, Elsevier, vol. 37(1), pages 40-78, October. [Downloadable!] (restricted)
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  12. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September. [Downloadable!] (restricted)
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  13. Lagunoff, Roger, 1992. "Fully Endogenous Mechanism Selection on Finite Outcome Sets," Economic Theory, Springer, vol. 2(4), pages 465-80, October.
  14. Roger Lagunoff, 1997. "A Theory of Constitutional Standards and Civil Liberty," Game Theory and Information 9707004, EconWPA. [Downloadable!]
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  15. Roger Lagunoff, 2002. "Credible Communication in Dynastic Government," Wallis Working Papers WP34, University of Rochester - Wallis Institute of Political Economy. [Downloadable!]
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  16. Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1997. "Politico-economic equilibrium and economic growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 243-272, January. [Downloadable!] (restricted)
  17. Salvador Barbera & Matthew O. Jackson, 2002. "Choosing How to Choose: Self Stable Majority Rules," Microeconomics 0211003, EconWPA. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gradstein, Mark, 2005. "Democracy, Property Rights, Redistribution and Economic Growth," CEPR Discussion Papers 5130, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Gradstein, M., 2007. "Institutional Traps and Economic Growth," Cambridge Working Papers in Economics 0769, Faculty of Economics, University of Cambridge. [Downloadable!]
  3. Alberto Chong & Mark Gradstein, 2007. "Desigualdad, Democracia, Calidad Institucional y Redistribucion Fiscal," RES Working Papers 4548, Inter-American Development Bank, Research Department. [Downloadable!]
  4. Daron Acemoglu & James A. Robinson, 2006. "Persistence of Power, Elites and Institutions," NBER Working Papers 12108, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Gradstein, Mark, 2007. "Institutional Traps and Economic Growth," CEPR Discussion Papers 6414, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. William Jack & Roger Lagunoff, 2005. "Social Conflict and Gradual Political Succession: An Illustrative Model," Levine's Bibliography 784828000000000534, UCLA Department of Economics. [Downloadable!]
    Other versions:
  7. Alberto Chong & Mark Gradstein, 2007. "Inequality, Democracy, Institutional Quality, and Fiscal Redistribution," RES Working Papers 4547, Inter-American Development Bank, Research Department. [Downloadable!]
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