Three Essays in Political Economy

Chapter 1. The Effects of Political Competition on the Feasibility of Economic Reform This chapter shows that democracies may fail to enact desirable economic reforms even when such reforms Pareto dominate the status quo and there are no informational asymmetries. The key insight is that, even when reforms entail economic gains for all agents, electoral political losses cannot be compensated politically. Consequently, when the majority party has strong electoral support, minority parties pursue both low-gain reforms and high-gain reforms. Intermediate-gain reforms are harder to enact, since the electoral costs dominate welfare gains. In highly contested environments, only high-gain reforms succeed.\u3e Chapter 2. Effect of Internal and External Conflict on Democratization Incentives While internal threats help democratization (Acemoglu and Robinson 2000), external threats produce ambiguous effects. Wars may force concessions from elites in exchange for military support from the citizenry (Ticchi and Vindigni 2008). Alternatively, elites may use wars to consolidate power domestically (Powell 2006). I combine internal and external threats and show the conditions under which external threats promote or dissuade democratization. Three central results arise: i) externally initiated wars may force elites to democratize; ii) elites may consolidate power by instigating wars; and iii) externally initiated wars may prevent unstable autocracies from democratizing. Chapter 3. Are Voters Really Ambivalent about Economic Performance? A Reassessment of Brender and Drazen\u27s 2008 AER Paper Brender and Drazen (2008) claim that \u22voters, especially in developed countries and established democracies, do not like deficits, particularly in election years.\u22 and that \u22higher growth rates...raise the probability of reelections only in the less developed countries and in new democracies.\u22 In this chapter, I revisit and extend their exploration by making three modifications: I define an alternative measure of electoral success. I expand upon Brender and Drazen\u27s original sample, Finally, I employ cyclically-adjusted deficits instead of unadjusted deficits. I find that voters definitely reward growth in developing countries. There is some weaker evidence that voters reward growth in developed countries, although the effects are smaller. Voters in old democracies also reward growth. The finding that voters reward fiscal prudence is not conclusive