Simulating the Effects of Supply and Demand Elasticities on Political-Economic Equilibrium
Wallace's (1962) pioneering study brought to agricultural economics a focus on the role of supply and demand elasticity's in determining the efficiency with which agricultural policy transfers income among interest groups. His discussion...
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/840971468332983433/Simulating-the-effects-of-supply-and-demand-elasticities-on-political-economic-equilibrium http://hdl.handle.net/10986/28277 |
| Summary: | Wallace's (1962) pioneering study
brought to agricultural economics a focus on the role of
supply and demand elasticity's in determining the
efficiency with which agricultural policy transfers income
among interest groups. His discussion provides key insights
into what I call the "consequences of policy" side
of current models of political economy. Becker's (1983)
and Grossman and Helpman's (1994) models, both famously
seminal in the political economy literature, have such
"consequences" sides, and therefore when
agricultural policy is examined in their models'
frameworks, market elasticity's play key roles. These
two models have also "causes of policy" sides,
which describe interest groups' abilities to create
political pressure. Wallace aim is to provide a theoretical
review and exposition of the effects of elasticity's on
redistribution efficiency, and in turn on distortional
policies in political economic equilibrium. He demonstrates
how models of actual political economies might be built and
used to derive theoretical predictions about how market
elasticity's affect policy and income transfers.
Applying similar models to examine real world political
economies can provide testable hypotheses about how market
parameters affect distortional policies. |
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