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on Positive Political Economics |
| By: | Rosello, Giulia; Reatini, Maria Antonietta; Pinto, Gabriele; Cattani, Giorgio |
| Abstract: | Air pollution is a major externality whose consequences extend beyond health and productivity. This paper shows that short-run pollution shocks also reduce democratic participation. We combine official, municipality-level election results from 32 national, European, regional, and municipal elections in Italy (2013-2022) with newly assembled daily measures of PM2.5, PM10, and NO2 for all Italian municipalities. Our identification strategy exploits quasi-random election-day deviations in local pollution relative to recent conditions, and we corroborate the results using wind speed as an instrument for particulate matter. Higher pollution on election day substantially depresses turnout: a 10 μg/m3 increase in PM2.5 (roughly doubling typical exposure) lowers participation by 2-3 percentage points, corresponding to about one million fewer votes. The estimates are similar for PM10 and NO2, and when pollution exceeds WHO guideline thresholds. Using post-election survey data from the 2013, 2018, and 2022 national elections coupled with survey-date exposure, we find consistent individual-level declines in reported voting intentions, with larger effects among citizens who report higher political interest. These findings identify the political-economy cost of air pollution, which not only reduces turnout but distorts the democratic representation by altering who turns out, not just how many. Our results suggest that environmental regulation can strengthen the democratic process by improving political participation and representation, in addition to its health and welfare benefits. |
| Keywords: | Air Pollution, Turnout, Environmental Effects, Political Participation |
| JEL: | Q51 Q53 D72 D91 O44 |
| Date: | 2026–02–24 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2026004 |
| By: | Gratton, Gabriele; Lee, Barton E. |
| Abstract: | We study a model of popular demand for anti-elite populist reforms that drain the swamp: replace experienced public servants with novices that will only acquire experience with time. Voters benefit from experienced public servants because they are more effective at delivering public goods and more competent at detecting emergency threats. However, public servants' policy preferences do not always align with those of voters. This tradeoff produces two key forces in our model: public servants' incompetence spurs disagreement between them and voters, and their effectiveness grants them more power to dictate policy. Both of these effects fuel mistrust between voters and public servants, sometimes inducing voters to drain the swamp in cycles of anti-elite populism. We study which factors can sustain a responsive democracy or induce a technocracy. When instead populism arises, we discuss which reforms may reduce the frequency of populist cycles, including recruiting of public servants and isolating them from politics. Our results support the view that a more inclusive and representative bureaucracy protects against anti-elite populism. We provide empirical evidence that lack of trust in public servants is a key force behind support for anti-elite populist parties and argue that our model helps explain the rise of anti-elite populism in large robust democracies. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:336736 |
| By: | António Afonso; José Alves; Frederico Silva Leal |
| Abstract: | Using quarterly data for the period Q1:2000–Q4:2024, the study examines whether elections in EU‑27 member states shape the composition and timing of fiscal policy strategies, and how political, fiscal and institutional constraints condition these dynamics. Employing a two‑way fixed‑effects framework, we find evidence that elections consistently lead to increases in primary expenditure. These effects are visible across several components, namely compensation of employees, intermediate consumption, gross fixed capital formation, and other primary expenditure. Using alternative electoral windows reveals that some adjustments begin before the electoral year, particularly in the case of GFCF and other primary expenditure, suggesting medium‑term planning of politically salient spending. Importantly, these patterns emerge only around regular elections, with no evidence of political budget cycles in early elections. In addition, high‑debt countries tend to adopt more restrictive electoral strategies, EU membership moderates pre‑electoral spending, and coalition governments appear to impose additional fiscal discipline during election periods. Overall, the findings indicate that political budget cycles persist in the European Union, but their magnitude and composition depend critically on fiscal conditions, institutional frameworks, and governance structures. |
| Keywords: | political budget cycles, fiscal policy, elections, European Union |
| JEL: | D72 E62 H60 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12440 |
| By: | Johannes Matzat; Axel Dreher; Sarah Langlotz; Christopher Parsons |
| Abstract: | We provide causal evidence that immigration has contributed to the polarization of American politics. Using an ancestry-based shift-share instrument, we study immigration flows into U.S. counties between 1992 and 2016. Counties exposed to larger immigrant inflows become more polarized both in campaign contributions and in political representation: donors increasingly support ideologically extreme candidates for the U.S. House of Representatives, and the candidates who win office are themselves further from the ideological center. These effects are most pronounced in primary elections, where moderate Democrats are more likely to lose and conservative Republicans more likely to win in counties with higher immigration inflows. The rightward shift is strongest in occupations with high immigrant shares but limited interpersonal contact, suggesting that exposure without interaction amplifies perceived threat. We complement these results with original survey evidence that sheds light on the underlying mechanisms. Liberals and conservatives differ less in their economic assessments of immigration than in their cultural interpretations: liberals stress diversity and opportunity, whereas conservatives emphasize risk and social cohesion. Together, these findings indicate that immigration reshapes American politics through the joint forces of salience and contact – heightening polarization where immigrants are visible but unfamiliar, and attenuating it where interaction is routine. |
| Keywords: | migration, polarization, political ideology, United States |
| JEL: | J15 F52 F63 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12377 |
| By: | Federica Lanterna (Department of Economics, Society and Politics, University of Urbino Carlo Bo, Italy); Giovanni Marin (Department of Economics, Society and Politics, University of Urbino Carlo Bo, Italy; SEEDS Sustainability Environmental Economics and Dynamics Studies, Italy; FEEM Fondazione Eni Enrico Mattei, Italy); Agnese Sacchi (Department of Economics, Society and Politics, University of Urbino Carlo Bo, Italy; IDEAGOV, Spain) |
| Abstract: | Environmental challenges increasingly shape political discourses across Europe, yet their influence on actual environmental governance remains unclear. This paper examines the political economy mechanisms linking environmental change, party platforms, and the decentralisation of environmental protection expenditure in 27 EU member states from 2002 to 2022. We distinguish between political signalling - the commitments parties make in electoral manifestos - and policy implementation, measured through actual decentralised environmental spending. Our results reveal a sharp asymmetry: while extreme events substantially increase the salience of environmental protection in party platforms, they do not translate into changes in the territorial allocation of environmental expenditure. Instead, decentralisation responds primarily to long-term structural conditions, such as the relative weight of locally versus globally relevant emissions. Political orientations of governing coalitions, whether on environmental issues or decentralisation, show no systematic association with spending outcomes. Taken together, these findings highlight a persistent gap between electoral incentives and policy implementation in multilevel environmental governance, consistent with public-choice theories emphasising institutional inertia and limited political responsiveness beyond the stage of platform competition. |
| Keywords: | Decentralisation; environmental protection; natural disasters; political announcements; voters preferences |
| JEL: | H70 H72 H77 Q54 Q58 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:srt:wpaper:0526 |
| By: | Juan Diego Valencia (Universidad de los Andes) |
| Abstract: | How does a sudden, large-scale inflow of migrants reshape the political attitudes of locals? This paper uses a shift-share design that exploits exogenous variation in arrivals to estimate the effects of Venezuelan migration on political attitudes in Colombia between 2013 and 2019. The results suggest that exposure to the migration shock reduces locals’ support for redistribution, shifts their political ideology to the right, and weakens their support for elections by popular vote. A mediation analysis suggests that negative stereotypes about migrants and other migration-related concerns, including perceived labor market competition, security concerns, and concerns about migrants’ overuse of welfare programs, contribute to explain the decrease in the support for redistribution by increasing in-group identification sentiments among locals. The decrease in the support for elections by popular vote appears to be consistent with locals having less confidence on elections due to doubts about whether elected rulers can ensure an adequate provision of welfare services and maintain public order after the massive migration shock. Finally, the propensity of locals to adhere to anti-left narratives is a key driver of these shifts in political attitudes, including the rightward shift in ideology, which highlights the importance of the associations between the left-wing ideology and the Venezuelan regime in this setting. |
| Keywords: | Migration, Colombia, Political Attitudes, Sequential G-Estimation |
| JEL: | F22 D72 D91 J15 H53 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:022250 |
| By: | Fisman, Raymond; Leder-Luis, Jetson; O'Donnell, Catherine; Vannutelli, Silvia |
| Abstract: | Revolving door laws restrict public officials from representing private interests before government after leaving office. While these laws mitigate potential conflicts of interest, they also may affect the pool of candidates for public positions by lowering the financial benefits of holding office. We study the consequences of revolving door laws for political selection in U.S. state legislatures, exploiting the staggered roll-out of laws across states over time. We find that fewer new candidates enter politics in treated states and that incumbent legislators are less likely to leave office, leading to an increase in uncontested elections. The decline in entry is particularly strong for independent and more moderate candidates, which may increase polarization. We provide a model of politician career incentives to interpret the results. |
| JEL: | D72 D73 K16 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:336735 |
| By: | Luca Braghieri; Leonardo Bursztyn; Jan Fasnacht |
| Abstract: | Voting-based collective decisions are typically made either anonymously or publicly. Anonymous voting protects truthful expression but conceals individual behavior; public voting provides information about individual votes, but, when one option is socially stigmatized, it can distort participation and choices. We introduce threshold majority voting, in which voters choose a disclosure threshold determining whether and when their votes are revealed. In an experiment at UC Berkeley on the participation of transgender women in women’s sports, public voting nearly doubles abstention and reduces support for the stigmatized option. Threshold voting eliminates these distortions while revealing one-third of individual votes. |
| JEL: | C93 D72 D82 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34827 |
| By: | Karsten Müller; Carlo Rasmus Schwarz; Zekai Shen |
| Abstract: | Social media platforms are often credited with empowering grassroots movements in the pursuit of political freedoms. In this paper, we show how social media can also be exploited by political elites to undermine democratic institutions, using the January 6th, 2021 Capitol insurrection as a case study. We present three main findings. First, by exploiting plausibly exogenous variation in Twitter usage, we document that social media exposure predicts participation in the Capitol attack, donations for anti-democratic causes, beliefs in election fraud, and support for the January 6th rioters. Second, Donald Trump's tweets questioning the election's integrity were followed by spikes in "Stop the Steal" activity on Twitter and pro-Trump donations originating from high Twitter usage counties. Third, the insurrection and Trump's account deletion were followed by a decrease in the public expression of toxic political and "Stop the Steal" messaging by pro-Trump users on Twitter, but had little effect on privately held beliefs about the election outcome and pro-Trump donations. |
| Keywords: | social media, content moderation, January 6th, election denial |
| JEL: | L82 J15 O33 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12485 |
| By: | David McCune; Jennifer Wilson |
| Abstract: | We analyze how frequently instant runoff voting (IRV) selects the weakest (or least popular) candidate in three-candidate elections. We consider four definitions of ``weakest candidate'': the Borda loser, the Bucklin loser, the candidate with the most last-place votes, and the candidate with minimum social utility. We determine the probability that IRV selects the weakest candidate under the impartial anonymous culture and impartial culture models of voter behavior, and use Monte Carlo simulations to estimate these probabilities under several spatial models. We also examine this question empirically using a large dataset of real elections. Our results show that IRV can select the weakest candidates under each of these definitions, but such outcomes are generally rare. Across most models, the probability that IRV elects a given type of weakest candidate is at most 5\%. Larger probabilities arise only when the electorate is extremely polarized. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.21504 |
| By: | Vasiliki Fouka; Theo Serlin |
| Abstract: | When do people identify with their class? Evidence from social psychology shows that individuals are more likely to identify with a group if they are similar to its members. We study early 20th century Britain and show that regional cultural heterogeneity combined with internal migration influenced class identity. We develop and validate a measure of class identity using naming decisions. Exploiting within-household variation, we show that migration patterns that increased the local share of culturally-distant workers reduced working class identification. Where migration increased the cultural distance of the working class, workers were less likely to join unions, voters were less likely to support the nascent Labour Party, and parliamentary candidates were less likely to target working class voters. By 1911, slower in-migration and rising local population growth reduced working class distance in urban areas, which also became strongholds of support for Labour. Migration alters social identity and creates political cleavages. |
| Keywords: | migration, identity, class |
| JEL: | D72 J61 N33 Z10 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12419 |
| By: | Moon Duchin; Kristopher Tapp |
| Abstract: | In this paper, we develop the metric geometry of ranking statistics, proving that the two major permutation distances in the statistics literature -- Kendall tau and Spearman footrule -- extend naturally to incomplete rankings with both coordinate embeddings and graph realizations. This gives us a unifying framework that allows us to connect popular topics in computational social choice: metric preferences (and metric distortion), polarization, and proportionality. As an important application, the metric structure enables efficient identification of blocs of voters and slates of their preferred candidates. Since the definitions work for partial ballots, we can execute the methods not only on synthetic elections, but on a suite of real-world elections. This gives us robust clustering methods that often produce an identical grouping of voters -- even though one family of methods is based on a Condorcet-consistent ranking rule while the other is not. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.10293 |
| By: | Montagnes, B. Pablo; Peskowitz, Zachary; Sridharan, Suhas A. |
| Abstract: | Asset managers face increasing political risk stemming from concerns that they prioritize their own interests when voting on behalf of investors. Using survey evidence and structural estimation, we provide early evidence on how well asset managers represent their investors by studying the ideological alignment between the two in the initial implementation of "voting choice policies." These policies allow investors in mutual funds and ETFs a limited menu of options to express their preferences on how fund managers vote their shares in corporate proxy contests. We conduct an original survey to measure investors' preferences on management and shareholder proposals and assess how well voting choice policies agree with these preferences. Using this survey data, we structurally estimate the ideological locations of investors and compare them to those of the voting choice policies. Our structural estimation includes ideological weighting to account for variation in relative importance of different ESG topics. We find that voting choice policies are clustered in the first and third dimensions of the ideological space. These correspond to left-right preferences and the willingness to implement socially conservative restrictions on the agency of the firm's managers. The addition of a simple new voting choice policy, which supports the positions of a majority of survey respondents, can increase investor-policy alignment. |
| JEL: | M40 M41 M48 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:336738 |
| By: | Paula López-Villalba (University of Michigan); Christian Ruzzier (Universidad de San Andrés) |
| Abstract: | The most corrupt countries are developing or transition countries, have low income levels, and are closed economies. More interesting, corruption is significantly positively correlated with left-wing governments in a simple cross section of countries – conditional on GDP per capita, income inequality, dominant religion, a recent history of war, and a history of communist rule. Correlation is not causality, however. In this paper, we analyze the direct relevance of government ideology for the extent of corruption, which is a question that has received little attention in the literature so far. Exploiting close electoral races across the world in the post-WWII period in a regression discontinuity design, we compare the levels of corruption in countries where the left wins and loses elections by a small margin, and find that electing a left-wing government has a significant and positive effect on corruption. We also link our results to extended government intervention in the economy and lower-quality bureaucracies under the left. |
| Keywords: | corruption, ideology, partisan effects, close elections. |
| JEL: | D72 D73 D78 H11 K42 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:sad:wpaper:178 |
| By: | Fierro, Pedro; Aravena-Gonzalez, Ignacio; Aroca, Patricia; Rowe, Francisco |
| Abstract: | Political discontent, frequently mirrored in voting patterns, extends beyond ballot votes. By focusing on Valparaiso, Chile, we introduce a more comprehensive measure, external political efficacy (EPE), capturing a sense of abandonment and gauging public sentiment towards the political system’s responsiveness to their needs. Our analysis addresses individual and area-level factors underpinning individual variations in EPE. The evidence suggests that long-term territorial socio-economic disadvantage, rather than low-paid employment, is significantly related to individual discontent, highlighting lowered beliefs in system responsiveness. |
| Keywords: | geography of discontent; external political efficacy; territorial inequalities; political disaffection; political attitudes |
| JEL: | R12 R23 D63 N36 |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123676 |
| By: | Sara Caicedo-Silva (Universidad de los Andes) |
| Abstract: | This paper examines if and how economic ideas spread across political language. The publication of the TV Series and the book Free to Choose (FC) by Milton and Rosa Friedman in 1980 serves as a tool to understand how economic ideas are popularized and adopted by politicians. Using natural language models, I compute the semantic similarity between FC and the interventions in congressional records from 1975 to 1985 to assess the change in political debate speeches in the US. I find that Democratic legislators increasingly adopted the rhetorical framing of FC, reaching or even surpassing Republicans in the similarity of their speeches relative to FC. This convergence was especially strong in debates on macroeconomic policy and foreign trade. These results suggest that FC amplified existing liberal ideas and transformed them into a shared language of both advocacy and critique within Congress. |
| Keywords: | Political Discourse, Text-as-Data, Semantic Similarity, U.S. Congress |
| JEL: | B25 B41 D72 P16 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:022309 |
| By: | Matthew T. Cole; James Lake; Benjamin Zissimos |
| Abstract: | International environmental agreements (IEAs) often condition entry into force on ratification by a minimum number of countries, yet deep environmental commitments frequently face strong domestic political resistance. We study how IEA breadth, through minimum ratification thresholds (MRTs), and depth are jointly determined when domestic ratification incentives are endogenous. In our model, lobbying competition between pro- and anti-environmental interest groups shape domestic ratification outcomes, and lobbying incentives depend on expectations about ratification in other countries. MRTs affect domestic political incentives by altering the pivotality of a country’s ratification for entry into force and the extent to which global emissions externalities are internalized. As a result, deeper agreements optimally feature lower MRTs: governments relax breadth requirements to offset endogenous domestic political resistance to more ambitious environmental commitments. Our analysis provides a political-economy foundation for the breadth–depth trade-off and offers a novel perspective on free riding that operates through domestic political effort rather than participation or enforcement mechanisms. |
| Keywords: | international environmental agreements, minimum ratification threshold, contest, ratification, lobbying, domestic political economy, breadth–depth trade-off, free riding |
| JEL: | Q54 H41 D72 F53 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12489 |
| By: | Mai Hassan (Unknown); Horacio Larreguy (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Stuart Russell (Unknown) |
| Abstract: | Most research on biased public sector hiring highlights local politicians' incentives to distribute government positions to partisan supporters. Other studies instead point to the role of bureaucratic managers in allocating government jobs to close contacts. We jointly consider the relative importance of each source of biased hiring as an allocation problem between managers and politicians who have different preferences regarding public sector hiring and different abilities to realize those preferences. We develop a theoretical model of each actor's relative leverage and relative preferences for different types of public sector positions. We empirically examine our theory using the universe of payroll data in Kenyan local governments from 2004 to 2013. We find evidence of both patronage and bureaucratic favoritism, but with different types of bias concentrated in different types of government jobs, as our theory predicts. Our results highlight the inadequacy of examining political patronage alone without incorporating the preferences and leverage of the bureaucratic managers who are intricately involved in hiring processes. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04922873 |
| By: | Sibo Liu; Alexey Makarin; Jinfeng Wu; Dong Zhang |
| Abstract: | We present the first systematic analysis of how countries cover each other in the news, using a newly constructed dataset of 55, 240 media sources from 176 countries between 2015 and 2022, drawing upon a corpus of 1.4 billion online news articles. We document a pattern of global media bias: countries with greater differences in democracy levels systematically portray each other more negatively, shaping both the sentiment and thematic content of coverage. This bias is especially pronounced when less democratic countries report on liberal democracies, when state-controlled media is involved, or when the reporting country experiences economic downturns or political turmoil. We corroborate these findings exploiting episodes of democratic erosion in a difference-in-differences design. Using similarities in how countries report on third countries, we construct and introduce a novel granular measure of global media alliances. Finally, we show that cross-country media sentiment predicts subsequent public attitudes. |
| Keywords: | media bias, democracy, information control, geopolitics, soft power |
| JEL: | P00 F51 D74 L82 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12459 |
| By: | Julia Cagé; Malka Guillot; Yuchen Huang |
| Abstract: | In many countries, both charitable and political donations benefit from generous – and often similar – tax incentives. While a large literature has studied the tax-price elasticity of charitable giving, little is known about political donations. Using a large-scale survey experiment (N = 12, 600), we investigate the relative efficiency of different tax schemes in fostering political and charitable donations. We document that repealing the existing non-refundable income-tax credit decreases charitable donations but not political donations, pointing toward greater fiscal incentives behind charitable giving. We next show that, conditional on giving, matching – where the government matches individual donations at a fixed rate – increases both political and charitable giving, but that it decreases the probability of giving to charities at the extensive margin. Finally, using a Principal Component Analysis (PCA) and generic machine learning, we document important dimensions of heterogeneity, and discuss the policy implications of our findings. |
| Keywords: | charitable giving, political donations, tax incentives |
| JEL: | H24 H31 L38 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12444 |
| By: | Nauro Campos; Flavia Ginefra; Angelo Martelli; Alessio Terzi; Nauro F. Campos |
| Abstract: | This paper reviews research across economics, political economy, political science, and public policy to investigate how institutions shape the adoption, implementation, and durability of climate policies. We examine how formal institutions (i) coordinate implementation capacity, (ii) anchor long-term commitments, and (iii) mediate distributional conflict. We also discuss how informal institutions, such as social norms and trust, further condition whether formal mechanisms translate into durable action. We distinguish quasi-experimental evidence from correlational and case-based findings, identifying where economic methods could further sharpen evidence, and conclude with a research agenda focused on institutional interdependencies and the conditions under which institutions can facilitate the adoption of effective and irreversible climate policies. |
| Keywords: | climate change, institutions, political economy, climate governance |
| JEL: | D72 H11 P48 O43 O44 Q54 Q58 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12490 |
| By: | Sarah Langlotz; Johannes Matzat; Axel Dreher; Christopher Parsons |
| Abstract: | Do factual immigration updates shift societal concerns across political ideologies? Conducting an online experiment in the lead-up to the 2024 U.S. Presidential Election, respondents provided local immigrant stock and flow estimates before being randomized to receive realistic information on stocks or flows, framed as constant or rising. Most respondents overestimate stocks and flows, with asymmetries emerging across ideologies. Information treatments lower redistribution and tax concerns by 5.4 percentage points on average. Immigration attitudes remain unchanged. Liberals overestimate stocks most, responding to stock treatments. Conservatives overstate flows more, responding to flow information. This pattern is consistent with motivated reasoning: identity-linked immigration views are resistant to correction, while redistribution concerns are elastic to facts when information targets the migration dimension most salient to each ideology. |
| Keywords: | migrant stocks, migrant flows, information, political ideology, United States |
| JEL: | J15 F52 F63 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12390 |
| By: | Mohamad Ikhsan (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)) |
| Abstract: | This paper examines the political economy of reform in Indonesia, with particular attention to the contrast between the New Order period and the post-Soeharto democratic era. While reforms under Soeharto—such as the Instruksi Presiden (Inpres) programs—succeeded in delivering rapid poverty reduction and infrastructure expansion, post-1998 reforms have often faltered despite broad parliamentary majorities and improved macroeconomic stability. The analysis identifies seven recurring constraints to reform implementation: (i) time lags between reform costs and benefits, (ii) distributional asymmetries between concentrated losers and diffuse winners, (iii) credibility deficits, (iv) reform fatigue after the IMF era, (v) nationalist and sovereignty concerns, (vi) limited fiscal space, and (vii) weak bureaucratic capacity. The study also highlights Indonesia’s “fiscal policy trilemma†and the importance of sequencing. By prioritizing fiscal consolidation in the 2000s, Indonesia created the credibility and fiscal room necessary for later tax and infrastructure reforms. The central argument is that reform success in Indonesia has depended less on policy design than on the alignment of technocratic pragmatism, political legitimacy, and institutional credibility. The Indonesian experience demonstrates that majority rule in a democracy does not guarantee reform capacity; without credible institutions, coalitions risk degenerating into vehicles for patronage rather than engines of structural change. |
| Keywords: | Indonesia — economic reform — political economy — fiscal trilemma — Inpres programs — decentralization — institutional credibility — oligarchic capture |
| JEL: | H11 O23 O43 P16 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:lpe:wpaper:202587 |