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Political integration, special interests and growth

Objective

Does political integration affect long run growth? While there is a large literature on the effects of economic integration on the economic performance of countries, this question has received little attention.

The objective of this research is to provide a theory that links political integration between previously independent countries to economic growth. The project is to build an endogenous growth model in which technological progress creates a conflict between groups that benefit and groups that lose from innovations.

Economic policy influences the extent of technological advances. Interest groups lobby the government and affect technological progress and growth. Under political integration, countries form an international union and delegate to a union government relevant economic policy prerogatives.

This shift in jurisdiction changes the size of the political market and the extent of competition for political influence between special interest groups. Through this channel political integration affects t he equilibrium policy, technological progress and long run growth.

The methodology proposed in this research is innovative: the relationship between special interests and the policymaker will be modelled as a (dynamic) common agency game.

Moreover, lobby formation can be studied as an endogenous decision of interest groups. By focusing on the political economy of growth in an international union, this project wants to contribute to the ongoing research on a growth agenda for Europe.

In particular,
- it will shed light on relevant political constraints that limit growth in the EU;
- it will provide a formal framework to think about policy implications and institutional solutions to deliver higher growth in Europe.

Call for proposal

FP6-2004-MOBILITY-5
See other projects for this call

Coordinator

EUROPEAN UNIVERSITY INSTITUTE
Address
Via Dei Roccettini 9
San Domenico Di Fiesole Firenze
Italy