Economic approaches to political institutions

by

Torsten Persson 

Abstract

Political institutions affect the rules of the game in which politics is played.  Economists now have theoretical approaches to explain the impact of institutions on policy, and empirical evidence to support the relevance of the theory. This article sketches a framework to inform discussions about how political institutions shape policy outcomes.  It does so using four examples: majoritarian versus proportional elections; parliamentary versus presidential government; whether to impose term-limits on office holders; and the choice between direct and representative democracy.  Each example illustrates how theory and data can be brought together to investigate a specific issue.