Power fluctuations and political economy

Daron Acemoglu, Mikhail Golosov, Aleh Tsyvinski

Research output: Contribution to journalArticlepeer-review

35 Scopus citations


We study (constrained) Pareto efficient allocations in a dynamic production economy where the group that holds political power decides the allocation of resources. For high discount factors, the economy converges to a first-best allocation where labor supply decisions are not distorted. For low discount factors, distortions do not disappear and fluctuate over time. Most importantly, the set of sustainable first-best allocations is larger when there is less persistence in the identity of the party in power (because this encourages political compromise). This result contradicts the common presumption that there will be fewer distortions when there is a "stable ruling group".

Original languageEnglish (US)
Pages (from-to)1009-1041
Number of pages33
JournalJournal of Economic Theory
Issue number3
StatePublished - May 2011

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


  • Commitment problem
  • Dynamic political economy
  • Olson-McGuire hypothesis
  • Political compromise
  • Political economy
  • Political power


Dive into the research topics of 'Power fluctuations and political economy'. Together they form a unique fingerprint.

Cite this