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Essays on political economy

Belmonte, Alessandro (2014) Essays on political economy. Advisor: Vindigni, Prof. Andrea. pp. 161. [IMT PhD Thesis]

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Abstract

While a vast literature has been collected pointing out the role of the human capital on economic growth, a few has been said, in Economics, on the mechanism through which education directly impacts on democracy. The present dissertation proposes a novel microfoundation of this nexus based on the paramount role of education as economic growth engine and determinant of political participation. The first two works introduce elements of political psychology in order to shed lights on individual cognitive process that might favor, overall, a culture of democracy. Education is then a cognitive tool that citizens/voters can use to decode the information content of political signals and to keep rulers in charge accountable. We formally show that the entire initial distribution of education matters for a successful democracy and that the median is pivotal in the political process. Motivated by that in the last work we propose a statistical analysis of the distribution of the Italian primary school service. Primary schools tend to distribute in a complex way according to geographical features of the territory, schooling aged population density, and possible interactions between the two. Despite the school system is financed at a State level, we outline the persistence of remarkable differences not directly attributable to historical divergences among different macro-area of the country but rather between montane areas and more dynamic regions deputed to explain economic and political divergences. Chapter 2: We propose a political agency model where rent-maximizer rulers are constrained by sophisticated principals/producers that use an awareness-management model `a la B´enabou and Tirole. Sophistication is explained by educational attainments and producers are endowed with different levels of education, that increase over time with human capital investments. We allow education to be both the engine of growth and a determinant of political participation; in equilibrium, more educated societies are more able to punish politicians that, in turn, invest more in productive public goods such as infrastructure, roads or legal rules for contracts enforcement. We prove the existence of multiple steady states featuring, respectively, a sophisticated society with congruent politicians in office, and a naive society ruled by dissonant politicians. Finally, we address inequality concerns and show how, for intermediate values, inequality opposingly hits citizens and ruler and only the latter is found to better off; conversely, citizens are averse to inequality, contributing to explain, via sophisticated accountability, why most people dislike living in a society which is too unequal. Chapter 3: The paper originally attempts to explain the rise of the new wave of populism in Europe and the persistence of the Latin American populism. Such phenomena rose an unresolved political puzzle according to which populist politicians has been widely supported by the electorate while ultimately hurt the economic interests of the majorities. We address this puzzle by looking at the electorate side and, specifically, at individual citizens that are endowed with different level of political sophistication. According to the Political Psychology literature, we approximate political sophistication in terms of individual education attainments whose distribution evolve over time with human capital investments. In each period, the distribution of political sophistication within a country generates different incentive structure for the incumbent that accordingly optimally decide whether to be a populist or a responsible type whereas between countries might determine completely different equilibria in the long run, one with populist politicians and one ruled by responsible ones. I argue that rent-maximizer politicians have the chance to behave in a populist fashion when a naive electorate fail in keeping rulers politically accountable. Despite citizens are politically committed to responsible economic policy, naive voters are basically unaware of the politicians intentions providing to the latter opportunities for the manipulation of the economy and the electoral outcome. Populist rulers carry out inefficient investment with the only intent to induce a mean-increasing spread in future distributions of human capital so as to increase electoral consensus based on a naive electorate and to maximize tax revenues based on a few of rich. Chapter 4: We characterize the statistical law according to which Italian primary school-size distributes. We find that the schoolsize can be approximated by a log-normal distribution, with a fat lower tail that collects a large number of very small schools. The upper tail of the school-size distribution decreases exponentially and the growth rates are distributed with a Laplace PDF. These distributions are similar to those observed for firms and are consistent with a Bose-Einstein preferential attachment process. The body of the distribution features a bimodal shape suggesting some source of heterogeneity in the school organization that we uncover by an indepth analysis of the relation between schools-size and citysize. We propose a novel cluster methodology and a new spatial interaction approach among schools which outline the variety of policies implemented in Italy. Different regional policies are also discussed shedding lights on the relation between policy and geographical features.

Item Type: IMT PhD Thesis
Subjects: H Social Sciences > HB Economic Theory
PhD Course: Economics, Markets, Institutions
Identification Number: 10.6092/imtlucca/e-theses/158
Date Deposited: 19 Jan 2015 10:19
URI: http://e-theses.imtlucca.it/id/eprint/158

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