Monday, March 10, 2008

Best Working Paper I Have Read Today

The paper borrows ideas from IO and applies it in the political arena. Best bits of the paper:

Perhaps constitutions or other political institutions designed to police the amount of political
competitiveness better serve the public by monitoring entry barriers and markups than monitoring the number of competitors.

The monopolistic competition model suggests that the product mix and design , such as the composition of taxes, spending, and economic regulations are functions of economics and demographics, but not regime Although we do not deny that a dictator prefers more money to less, the fact that his taking is limited by the threat of entry means that he has an important reason to spend much of the tax revenue in the public interest: it buys him popular support and thereby regime longevity. Nondemocracies may collect more revenue, but they are not leviathans.

More here. One of the authors, Kevin Tsui now teaching at Clemson is from Hong Kong!

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