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Discussion:

Discussion:. “How do Political Institutions Work? Veto Players, Intertemporal Interactions, and Policy Adaptability” Loukas Balafoutas, University of Edinburgh. The question: How do political institutions (number of veto players) shape policies? The story:

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Discussion:

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  1. Discussion: “How do Political Institutions Work? Veto Players, Intertemporal Interactions, and Policy Adaptability” Loukas Balafoutas, University of Edinburgh

  2. The question: How do political institutions (number of veto players) shape policies? The story: Institutions determine the probability of obtaining intertemporal cooperation on the first best equilibrium A very brief summary…

  3. What do the data say? • Very interesting empirical observation: More veto players imply more adaptable policies • Counterintuitive • Intertemporal cooperation story plausible and appealing. Consistent with data

  4. A new approach • Policy change broken down into “good” and “bad” change • Adaptability=ability to respond to shocks • Stability=avoidance of unnecessary volatility • Normative analysis: Both adaptability and stability desirable

  5. A contradiction to the literature? • Results sensitive to definitions • Empirical part: are we measuring decisiveness and resoluteness, or adaptability and stability? • Regression with stability as dep. vbl. • Main point: Intertemporal cooperation leads to good policies

  6. Additional comments • Does this simple model generalise to policies other than budget allocation? • Other institutional features? • First Best as a focal equilibrium. Different degrees of cooperation? • Why does rejection lead to the cooperative equilibrium?

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