Allan Drazen - Academia.edu (original) (raw)

Papers by Allan Drazen

Oxford University Press eBooks, Jul 21, 2005

Existing models of contagious currency crises are summarized and surveyed, and it is argued that ... more Existing models of contagious currency crises are summarized and surveyed, and it is argued that more weight should be put on political factors. Towards this end, the concept of political contagion introduced, whereby contagion in speculative attacks across currencies arises solely because of political objectives of countries. A specific model of "membership" contagion is presented. The desire to be part of a political-economic union, where maintaining a fixed exchange rate is a condition for membership and where the value of membership depends positively on who else is a member, is shown to give rise to potential contagion. We then present evidence suggesting that political contagion may have been important in the 1992-3 EMS crisis.

Advances in the Theory and Measurement of Unemployment, 1990

Since the beginning of the 1970s, many countries in Western Europe have experienced persistent hi... more Since the beginning of the 1970s, many countries in Western Europe have experienced persistent high unemployment. For the European Community as a whole the unemployment rate today is approximately four times its 1970 level. This increase in unemployment reflects a significant increase in the duration of unemployment spells and reduced turnover among the unemployed.

World Development, 1982

Unemployment in many less developed countries is characterized by a significant urban-rural wage ... more Unemployment in many less developed countries is characterized by a significant urban-rural wage differential coexisting with high urban unemployment. This may be consistent with optimization when there is imperfect information about a worker's ability, and abilities are heterogeneous. Firms know only the average quality of workers in the labour pool. High urban wages induce inmigration of workers from rural areas, improving the average quality of the urban labour pool which has been depleted of high ability workers by previous screening. Hence, both sides of the market way find high non-market-clearing wages optimal. Quantity constraints from imperfect capital markets may strengthen this effect.

The Quarterly Journal of Economics, 1985

A general model of optimal factor accumulation over an infinite horizon is presented in which the... more A general model of optimal factor accumulation over an infinite horizon is presented in which the steady state depends on initial conditions and on the history of the system. In contrast to conventional results, any change in initial conditions or any temporary shock in the convergence process will in general change the optimal steady state. The result is shown to arise, when the discount rate is positive, from standard assumptions made about the technology of converting heterogeneous factors from one type to another. *I wish to thank Michael Mussa for helpful discussions and Sherwin Rosen for perceptive comments. Financial support from the National Science Foundation

The Economic Journal, 1986

In this paper we present a model in which minimum wage legislation may be Pareto optimal. This ar... more In this paper we present a model in which minimum wage legislation may be Pareto optimal. This arises because a higher wage would be preferred to the market clearing wage by demanders for and suppliers of labour (even though unemployment is induced), and minimum wage ...

Journal of Public Economics, 2013

ABSTRACT Do elections allow voters to express their policy preferences, with change in government... more ABSTRACT Do elections allow voters to express their policy preferences, with change in government spending patterns following the election of a new leader? How long does it take for the composition of government spending to change following a change in leadership? Or, do significant spending changes precede (rather than follow) elections, with incumbents using significant changes in spending composition as an electoral tool? Using a dataset we created on government expenditure composition in 71 democracies over 1972–2009, we examine the relation between elections and significant changes in the composition of government spending. We find that leaders' replacements have no significant short-run effect on expenditure composition, even after controlling for various political and economic variables. Over the medium-term leadership changes are associated with larger changes in expenditure composition, but only in developed countries. We also find that election years are associated with larger expenditure composition changes in established democracies, but not in new democracies, which were found in our previous work to increase their overall level of expenditures in election years.

Carnegie-Rochester Conference Series on Public Policy, 1992

The Journal of Policy Reform, 1996

The Political Economy of Delayed Reform Allan Drazen 2.1 Introduction Economic reform is such a c... more The Political Economy of Delayed Reform Allan Drazen 2.1 Introduction Economic reform is such a commonly used term among both politicians and economists that a nai've observer might think that designing and im-plementing reforms is what policymakers actually do. The truth is ...

Comparative Economic Studies, 2007

We review research on political budget cycles across countries, including recent findings that th... more We review research on political budget cycles across countries, including recent findings that they are a phenomenon of new democracies and are statistically insignificant in old, established democracies. We then consider what may account for this and review several hypotheses. Recent empirical work also finds that voters in new democracies do not reward election-year deficit spending, raising questions about explanations focusing on the use of election-year deficits to gain votes. This suggests that the increase in election-year expenditures and deficits in new democracies may reflect other motives. Specifically, it is suggested that they may reflect attempts to shore up a fragile democracy.

Models based on monetary surprises are argued to be unconvincing explanations of the political bu... more Models based on monetary surprises are argued to be unconvincing explanations of the political business cycle, both theoretically and empirically. Instead, we often observe significant pre-electoral increases in fiscal expenditures or transfers, though monetary effects are also present, which we argue may reflect the accommodation of fiscal impulses. We present a model political business cycle model that combines active fiscal policy and passive monetary policy that addresses a number of objections to earlier models. The model stresses the interaction between an independent monetary authority and politicians, with the nature of the cycle depending on the nature of this interaction. In equilibrium the monetary authority accommodates the politicians desired policies in an election year, but is free from political influence in non-election years. Part of this research was done while visiting the Bank of Israel, which I wish to thank for its hospitality. I also with to thank participants at the 2001 CEPR European Summer Symposium in Macroeconomcs (ESSIM), May 30-June 2, 2001, and especially my discussant, John Driffill, for helpful comments.

… en: http://www. iies. su. se/ …, 2004

AWe wish to than seminar participants at IIES, Stockholm University and Tel Aviv University for u... more AWe wish to than seminar participants at IIES, Stockholm University and Tel Aviv University for useful comments. Financial Support from the National Science Foundation is gratefully acknowledged. Jack and Lisa Yael Professor of Comparative Economics, Tel Aviv ...

IMF working paper, 2004

This Working Paper should not be reported as representing the views of the IMF. The views express... more This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. We use the concepts of deliberative democracy from political science and cheap talk from economics to develop a better understanding of how public discussion can contribute to building and demonstrating ownership of IMF programs and hence to program success. We argue that ownership is more complex than many discussions of it would suggest, since it must include not only the willingness to carry out a program, but also the technical capacity and especially the political ability to do so. Public discussion can serve a number of purposes, each of which can be better understood by moving to a more formal treatment. We illustrate our points by means of simple examples. We also consider some of the drawbacks of public discussion, especially as applied to IMF programs.

Oxford Economic Papers, 1994

RECENT research has emphasized the conflict of interest between 'insiders' and 'ou... more RECENT research has emphasized the conflict of interest between 'insiders' and 'outsiders' in the labor market. Insiders are the employed workers or a subset of them, and they have priority in hiring relative to outsiders. The basic theme in this literature is that, for various reasons, ...