Université de Lausanne
Ecole des HEC
Département d'économétrie et d'économie politique

DEEP-EPFL Seminars in Macroeconomics

Thursday September 11, 2008, 13:00
Extranef, Dorigny, room 126

Giorgio BELLETTINI
(University of Bologna, Italy)

Political persistence, innovation and economic growth

Abstract
This paper provides a theoretical and empirical investigation of the relationship between politicians' tenure, innovation and growth. We develop a model with quality improvements in the intermediate good sector, where administrative and regulatory costs of doing business can be reduced through political connections. Within this framework, we show conditions under which low-quality producers can exploit political connections to retain their monopoly position. In this case, incumbent firms can prevent entry and innovation and the model delivers a negative association between politicians' tenure and economic growth. Evidence based on a sample of 173 countries over the 1975-2004 period supports our main theoretical predictions on the effect of political persistence on economic growth.

Web site of the seminar (with paper online): http://www.hec.unil.ch/deep/evenements-english/e-sem-all-2008-09.htm