Working Paper: CEPR ID: DP10374
Authors: Timothy Besley; Hannes Mueller
Abstract: This paper develops a model where an institutional constraint limits incumbent discretion to prevent adverse policy outcomes. We show that, in this framework, executive constraints have an impact on the mean and variance of policy. This allows us to interpret the empirical observation that growth volatility is lower in countries with strong executive constraints. We ?t the model to growth data and use our estimates to describe the heterogeneity in performance of weak and strong executive constraints across countries. This is used to illustrate the heterogeneous output response to the adoption of strong executive constraints. We then use the fitted values to consider the benefits of strong executive constraints in income terms.
Keywords: Executive Constraints; Growth; Robust Control
JEL Codes: O43; P16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| strong executive constraints (D20) | reduction in growth volatility (O49) |
| weak executive constraints (D20) | higher probabilities of low growth rates (O40) |
| strong executive constraints (D20) | significant income gains over a ten-year horizon (J17) |
| strong executive constraints (D20) | improved economic outcomes (O49) |
| executive constraints (D20) | changes in the policymaking process (D72) |