Torsten Persson

• Stockholm University

The COVID-19 pandemic struck societies directly and indirectly, not just challenging population health but disrupting many aspects of life. Different effects of the spreading virus—and the measures to fight it—are reported and discussed in different scientific fora, with hard-to-compare methods and metrics from different traditions. While the pande...

Reducing the emissions of greenhouse gases may be almost impossible without a green transition—a substantial transformation of consumption and production patterns. To study such transitions, we propose a dynamic model, which differs in two ways from the common approach in economics. First, consumption patterns reflect not just changing prices and t...

The COVID-19 pandemic struck societies directly and indirectly, challenging not just people’s health but many aspects of life. But pandemic burdens fell more heavily on some groups than others. These different consequences of the spreading virus – and the measures to fight them – are reported and analyzed in different scientific fora, with hard-to-...

We examine the two-way interplay between organizational cultures and organizational design, where culture is modeled as the prevailing social identities among workplace groups that can affect project choices. In a setting where cultural dynamics depend on the expected relative payoffs of holding different identities, we investigate how tribalism an...

We study the politicians and voters of the Sweden Democrats, a major populist radical-right party. Based on detailed administrative data, we present the first comprehensive account of which politicians are selected into such a party. Surveys show that politicians and voters of the Sweden Democrats share strong anti-establishment and anti-immigratio...

This paper studies individual and social motives in tax evasion. We build a simple dynamic model that incorporates these motives and their interaction. The social motives underpin the role of norms and is the source of the dynamics that we study. Our empirical analysis exploits the adoption in 1990 of a poll tax to fund local government in the UK,...

This paper studies how material incentives and social norms shape ethnic identity choices in China. Provincial policies give material benefits to minorities, which consequently affect the ethnicity choices for children in ethnically mixed marriages. We formalize the ethnic identity choice in a simple framework, which highlights the interaction of (...

This paper develops a framework to study environmentalism as a cultural phenomenon, namely as reflecting a process of social identification with certain values. The model is used to explain how the shares of environmentalists and materialists in society can coevolve with taxes on emissions to protect society against damages caused by environmental...

This paper builds a model of the two-way interaction between democratic values and institutions to bridge sociological research, focusing on values, with economics research, which studies strategic decisions. Some citizens hold values that make them protest to preserve democracy with the share of such citizens evolving endogenously over time. There...

We exploit close elections in Swedish municipalities to test whether relatives of politicians who become mayors obtain economic benefits. We find no benefits for the siblings of new mayors, but the average earnings of children of newly appointed mayors rise by about 15%. Administrative information on occupational and residence status show that the...

We develop a model where party leaders choose the competence of politicians on the ballot to trade off electoral success against their own survival. The predicted correlation between the competence of party leaders and followers is strongly supported in Swedish data.We use a novel approach, based on register data for the earnings of the whole popul...

Can a democracy attract competent leaders, while attaining broad representation? Economic models suggest that free-riding incentives and lower opportunity costs give the less competent a comparative advantage at entering political life. Moreover, if elites have more human capital, selecting on competence may lead to uneven representation. This pape...

Strengthening executive constraints is one of the key means of improving political governance. This paper argues that resilient leaders who face a lower probability of being replaced are less likely to reform institutions in the direction of constraining executive power. We test this idea empirically using data on leaders since 1875 using two proxi...

In this analysis of how electoral rules and outcomes shape the internal organization of political parties, we make an analogy to primary elections to argue that parties use preference-vote tallies to identify popular politicians and promote them to positions of power. We document this behavior among parties in Sweden's semi-open-list system and in...

In this analysis of how electoral rules and outcomes shape the internal organization of political parties, we make an analogy to primary elections to argue that parties use preference-vote tallies to identify popular politicians and promote them to positions of power. We document this behavior among parties in Sweden's semi-open-list system and in...

Low-income countries typically collect taxes of between 10 to 20 percent of GDP while the average for high-income countries is more like 40 percent. In order to understand taxation, economic development, and the relationships between them, we need to think about the forces that drive the development process. Poor countries are poor for certain reas...

Three important aspects of development—per capita income, state capabilities, and (the absence of) political violence—are correlated with each other at the country level. This article discusses the causes of such development clusters and highlights two explanations: common economic, political, and social drivers and complementarities (twoway positi...

Preferential voting has been introduced in a number of proportional election systems over the last 20 years, mainly as a means to increase the accountability of individual politicians. But most of these reforms have been criticized as blatant failures. In this paper, we discover a genuinely new fact, which calls into question this negative evaluati...

The central question in taxation and development is: "how does a government go from raising around 10% of GDP in taxes to raising around 40%"? This paper looks at the economic and political forces that shape the way that fiscal capacity is created and sustained. As well as reviewing the literature and evidence, it builds an overarching framework to...

Until very recently, the theory of macroeconomic policy dealt with the economic consequences of given policy rules. Knowing these consequences and the policy objectives, one would then select the optimal policy rule. Implicit in this approach to policy design is a particular view of the policymaker, namely that he is a passive agent that can be pro...

Throughout history, many types of labor arrangement have involved the use of coercion. While the determinants of coercion have been studied extensively, less is known about the consequences of coercion for human capital accumulation. First, we develop a model of labor market coercion under an elite-controlled regime, and show that it depresses the...

Efforts to increase female political representation are often thought to be at odds with meritocracy. This paper develops a theoretical framework and an empirical analysis to examine this idea. We show how the survival concerns of a mediocre male party leadership can create incentives for gender imbalance and more incompetent men in office. The pre...

Uses a game theoretic approach to explore which economic policies are 'credible' and 'politically feasible', questions that had eluded traditional macroeconomic approaches. © 1990 OPA (Overseas Publishers Association). All rights reserved.

We estimate how random weather fluctuations affected infant mortality across 28 African countries in the past, combining high-resolution data from retrospective fertility surveys (DHS) and climate-model reanalysis (ERA-40). We find that infants were much more likely to die when exposed in utero to much longer malaria spells than normal in epidemic...

Using data from the last 150 years in a small set of countries, and from the postwar period in a large set of countries, we show that large investments in state primary education systems tend to occur when countries face military rivals or threats from their neighbors. By contrast, we find that democratic transitions are negatively associated with...

This chapter summarizes the lessons from Chapter 4 in the form of a function that describes endogenous political turnover. This preliminary allows us to study equilibrium investments in fiscal and legal capacity in the comprehensive core model. Section 5.2 develops the model by adding private capital formation along the same lines as in Section 3.2...

This chapter first sets out the book's purpose, which is to offer an approach to studying weak or fragile states, taking a first step toward bringing them into mainstream economic analyses. It proceeds by using more-or-less standard ideas and methods to study the basics of state building. A key issue is to understand what creates effective states....

This chapter explores the forces that shape investments in fiscal capacity. It sets out a core model that shows how this aspect of state building is influenced by economic and political factors, such as common interests and political institutions. A key feature of the model has been to delineate the types of states that can emerge in equilibrium. I...

This chapter sums up and takes stock of the present findings. The entire project in this book is theory-driven with a core model at the heart of the approach. It ties together three different, but related, facets of development: breaking out of poverty, building a state strong enough to support markets and provide public goods, and putting an end t...

This chapter attempts to integrate two different strands of research on political violence, developing a theoretical model to analyze the common roots of repression and civil war. Under specific assumptions about the conflict technology, it shows that peace, repression (one-sided violence), and civil war (two-sided violence) become ordered states d...

This chapter takes some steps toward integrating endogenous political reform into the core model. A general finding is that forces that lead to political stability generally reduce the motives of ruling groups to undertake political reforms toward greater cohesiveness. It sketches some micropolitical foundations for the main macropolitical paramete...

This chapter explores the implications of the analytical approach for the design of development assistance. The model suggests a number of margins on which we would expect such assistance to have an effect. The results illustrate the difficulties faced by external donors and actors who are trying to improve the situation in developing countries, pa...

This chapter focuses on the productive role of government in improving the environment for doing business. Improvements in the performance of government are measured as total factor productivity and differences in income across countries can be explained by differences in the quality of their economic institutions. This makes it essential to unders...

“Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things.” So wrote Adam Smith a quarter of a millennium ago. Using the tools of modern political economics and combining eco...

This article offers a unified approach for studying political violence whether it emerges as repression or civil war. We formulate a model where an incumbent or opposition can use violence to maintain or acquire power to study which political and economic factors drive one-sided or two-sided violence (repression or civil war). The model predicts a...

"Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things." So wrote Adam Smith a quarter of a millennium ago. Using the tools of modern political economics and combining eco...

Does policymakers' horizon affect their willingness to support economic reforms? Voting in the U.S. Congress provides an ideal setting to address this question: differences between the House and Senate, in which members serve two-year and six-year mandates respectively, allow to examine the role of term length; the staggered structure of the Senate...

It is widely recognized that fragile states are key symptoms of under-development in many parts of the world. Such states are incapable of delivering basic services to their citizens and political violence is commonplace. As of yet, mainstream development economics has not dealt in any systematic way with such concerns and the implications for deve...

This paper presents a novel stylized fact and analyzes its contribution to the skill bias of technical change in U.S. manufacturing. The share of skilled labor embedded in intermediate inputs correlates strongly with the skill share employed in final production. This finding points towards an intersectoral technology-skill complementarity (ITSC). T...

This paper investigates the impact of propaganda on participation in violent con-ict. I examine the e¤ects of the infamous "hate radio" station Radio RTLM that called for the extermination of the Tutsi ethnic minority population before and dur-ing the 1994 Rwanda Genocide. I develop a model of participation in ethnic violence where radio broadcasts...

This paper develops a simple model to analyse how a lack of political competition may lead to policies that hinder economic growth. We test the predictions of the model on panel data for the US states. In these data, we find robust evidence that lack of political competition in a state is associated with anti-growth policies: higher taxes, lower ca...

A recent literature suggests that when wage setters are non-atomistic, strategic interac-tion between trade unions and the central bank may cause the monetary regime to matter for the labour market outcome, see Cukierman and Lippi (1999), Soskice and Iversen (2000), Vartiainen (2002), Holden (2003), Lippi (2003), Corricelli et al (2006), Gnocchi (2...

This is the first of three volumes containing edited versions of papers and commentaries presented at invited symposium sessions of the Ninth World Congress of the Econometric Society, held in London in August 2005. The papers summarize and interpret key developments, and they discuss future directions for a wide variety of topics in economics and...

These volumes constitute the invited proceedings from the Ninth World Congress of the Econometric Society held on the campus of University College London on August 19–24, 2005. As co-chairs of the Program Committee for the Congress, one of our most pleasant tasks was to select topics and authors for fifteen invited symposia – each organized around...

These volumes constitute the invited proceedings from the Ninth World Congress of the Econometric Society held on the campus of University College London on August 19–24, 2005. As co-chairs of the Program Committee for the Congress, one of our most pleasant tasks was to select topics and authors for fifteen invited symposia – each organized around...

Investments in fiscal capacity — economic institutions for tax compliance — are an important feature of economic development. This paper develops a dynamic model to study such investments and their evolution over time. We contrast a social planner’s investment path with paths where political constraints are important. Three types of states emerge i...

The political process in the United States appears to be highly polarized: ev-idence from voting patterns finds that the political positions of legislators have diverged substantially, while the largest campaign contributions come from the most extreme lobby groups and are directed to the most extreme candidates. Is the rise in campaign contributio...

I estimate the impact of Islamic rule on secular education and labor market outcomes. Using a regression discontinuity design, I compare elections where an Islamic party barely won or lost municipal mayor seats in Turkey. The results show that Islamic rule has had a large positive e¤ect on education, especially for women. This impact is not only la...

We investigate the historical origins of mistrust within Africa. Combining contemporary household survey data with historic data on slave shipments by ethnic group, we show that individuals whose ancestors were heavily raided during the slave trade today exhibit less trust in neighbors, relatives, and their local government. We confirm that the rel...

This paper explores empirically the role of party nomination pro-cedures in political selection. Using a new data set of Latin American parties, I find evidence of a positive relationship between the use of pri-maries, electoral performance and quality of government. I interpret these results as evidence of primaries improving political selection....

I estimate the impact of local Islamic rule on secular education in a regression discontinuity design, comparing elections where an Islamic party barely won or lost municipal mayor seats in Turkey. Anecdotal accounts suggest the importance of local political Islamic organization in alleviating barriers to entry for the poor an pious facing restrict...

We study the dynamics of economic and political change, theoretically and empirically. Democratic capital measured by a nation's historical experience with democracy, and the incidence of democracy in its neighborhood, appears to reduce exit rates from democracy and raise exit rates from autocracy. Higher democratic capital stimulates growth by inc...

The absence of state capacities to raise revenue and to support markets is a key factor in explaining the persistence of weak states. This paper reports on an ongoing project to investigate the incentive to invest in such capacities. The paper sets out a simple analytical structure in which state capacities are modeled as forward looking investment...

Perhaps the crowning achievement of mature democracies is the peaceful acceptance of the ballot box as the primary instrument for deciding who should hold power in society. We do not have to go far back in the history of most democratic states, however, to find a distinct role for political violence. Moreover, many inhabitants of the globe still re...

In this paper, we develop a dynamic politico-economic theory of social security to address two questions. First, how is social security sustained? Second, how does inequality a¤ect the size of social security, and can the theoretical predictions be consistent with the observed puzzling relationships between inequality and the size of social securit...

This paper explores empirically the role of nomination procedures on political selection and the determinants for adopting contestable selection methods such as primaries. Using data from Latin American parties, I find evidence that political competition increases probability of primary adoption. Moreover, primary nominated candidates obtained larg...

Does the disclosure of information about corruption practices induce a sustained reduction in corruption levels? We use publicly-released routine audit reports to study this question. The government of Puerto Rico has established a mechanism to routinely conduct municipal government audits, whose findings are then made publicly available and dissem...

This paper studies the incidence of civil war over time. We put forward a canonical model of civil war, which relates the incidence of conflict to circumstances, institutions and features of the underlying economy and polity. We use this model to derive testable predictions and to interpret the cross-sectional and times-series variations in civil c...

Economists generally assume that the state has sufficient institutional capacity to support markets and levy taxes. This paper develops a framework where "policy choices" in market regulation and taxation are constrained by past investments in legal and fiscal capacity. It studies the economic and political determinants of such investments, demonst...

These volumes constitute the invited proceedings from the Ninth World Congress of the Econometric Society held on the campus of University College London on August 19–24, 2005. As co-chairs of the Program Committee for the Congress, one of our most pleasant tasks was to select topics and authors for fifteen invited symposia – each organized around...

The paper illustrates how one may assess our comprehensive uncertainty about the various relations in the entire chain from human activity to climate change. Using a modified version of the RICE model of the global economy and climate, we perform Monte Carlo simulations, where full sets of parameters in the model's most important equations are draw...

I estimate the economic impact of the construction of colonial India's railroad network from 1861-1930. Using newly collected district-level data on annual output, prices and internal trade flows I find that the railroad network had the following effects: (1) Railroads caused transport costs along optimal routes to fall by 73 per-cent for an averag...

The article builds a simple model to investigate how different types of armed conflict shape fiscal capacity: the state's ability to raise revenue from taxes. It starts from the simple observation that external war tends to generate common interests across groups in society, whereas internal, civil war entails deep conflicting interests across grou...

This paper presents a novel stylized fact and analyzes its contribution to the skill bias of techni-cal change: The share of skilled labor embedded in intermediate inputs correlates strongly with the skill share employed in final production. This finding points towards an intersectoral technology-skill complementarity (ITSC). Empirical evidence sug...

The article builds a simple model to investigate how different types of armed conflict shape fiscal capacity: the state's ability to raise revenue from taxes. It starts from the simple observation that external war tends to generate common interests across groups in society, whereas internal, civil war entails deep conflicting interests across grou...

This article discusses recent empirical and theoretical research on the electoral rule, which is one feature of modern democracies. It determines that the electoral rule systematically shapes economic policy. An outline of some key objectives of electoral rules is presented in the first section; it further notes the stability and systematic selecti...

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...

We present evidence on the effect of social connections between workers and managers on productivity in the workplace. To evaluate whether the existence of social connections is beneficial to the firm's overall performance, we explore how the effects of social connections vary with the strength of managerial incentives and worker's ability. To do s...

Economists generally assume that the state has sufficient institutional capacity to support markets and levy taxes. This paper develops a framework where "policy choices" in market regulation and taxation are constrained by past investments in legal and fiscal capacity. It studies the economic and political determinants of such investments, demonst...

We estimate the effect of political regime transitions on growth with semi-parametric methods, combining difference in differences with matching, that have not been used in macroeconomic settings. Our semi-parametric estimates suggest that previous parametric estimates may have seriously underestimated the growth effects of democracy. In particular...

We estimate the effect of political regime transitions on growth with semi-parametric methods, combining difference in differences with matching, that have not been used in macroeconomic settings. Our semi-parametric estimates suggest that previous parametric estimates may have seriously underestimated the growth effects of democracy. In particular...

We present a theoretical model of a parliamentary democracy where electoral competition inside coalition governments induces higher spending than under single party governments. Policy preferences of parties are endogenous and derived from opportunistic reelection motives. The electoral rule affects government spending, but only indirectly: proport...

The variety of constitutional designs found in democratic governments has important effects on policy choices and outcomes. That is the conclusion reached in Democratic Constitutional Design and Public Policy, in which the constitutional procedures and constraints through which laws and public policies are adopted—election laws, the general archite...

We study the joint dynamics of economic and political change. Predictions of the simple model that we formulate in the paper get considerable support in a panel of data on political regimes and GDP per capita for about 150 countries over 150 years. Democratic capital - measured by a nation's historical experience with democracy and by the incidence...

Does democracy promote economic development? We review recent attempts to addresses this question, which exploit the within-country variation associated with historical transitions in and out of democracy. The answer is positive, but depends - in a subtle way - on the details of democratic reforms. First, democratizations and economic liberalizatio...

This paper demonstrates how time consistency of the Ramsey policy-the optimal fiscal and monetary policy under commitment-can be achieved. Each government should leave its successor with a unique maturity structure for nominal and indexed debt, such that the marginal benefit of a surprise inflation exactly balances the marginal cost. Unlike in earl...

No abstract available.

Many countries have the following structure: society delegates power over public policy to policymakers via elections. The policymakers in turn delegate the execution of those policies to non-elected civil servants. The concern voters have is to elect policymakers who will adopt the right policy mix and to have civil servants execute those policies...

One of the most cherished propositions in economics is that market competition by and large raises consumer welfare. But whether political competition has similarly virtuous consequences is far less discussed. This paper formulates a model to explain why political competition may enhance economic performance and uses the United States as a testing...

We present a theoretical model of a parliamentary democracy where electoral competition inside coalition governments induces higher spending than under single party governments. Policy preferences of parties are en- dogenous and derived from opportunistic reelection motives. The electoral rule affects government spending, but only indrectly: propor...

The paper combines insights from the recent research programs on constitutions and economic policy, and on history, institutions and growth. Drawing on cross-sectional as well as panel data, it presents new empirical results showing that the form of democracy (rather than democracy vs. non-democracy) has important consequences for the adoption of s...

This paper provides comprehensive empirical evidence that supports the predictions of Sargent and Wallace's “unpleasant monetarist arithmetic” that an increase in public debt is typically inflationary in countries with large public debt. Drawing on an extensive panel data set, we find that the relationship holds strongly in indebted developing...

The paper presents empirical findings regarding the economic policy consequences of constitutional arrangements, in three different dimensions. First, the data are consistent with several theoretical predictions about the consequences of electoral rules and forms of government for fiscal policy and rent extraction, even when non-random constitution...

We present a theoretical model of a parliamentary democracy, where party structures, government coalitions and fiscal policies are endogenously determined. The model predicts that, relative to proportional elections, majoritarian elections reduce government spending because they reduce party fragmentation and, therefore, the incidence of coalition...