The Politics of Economic Transitions | Jared Finnegan

Jared Finnegan, UC Berkeley, will present The Politics of Economic Transitions

Abstract

Why are some governments more effective at promoting economic change than others? We develop a theory of the politics of economic transitions that highlights the role of two central mechanisms – insulation and compensation – which enable politicians to overcome opposition from policy losers. We argue that institutions are one important set of factors that structure governments’ capacities for pursuing these strategies. Proportional electoral rules insulate politicians from voter backlash, while strong welfare states enable them to compensate households. In each case, governments are better able to implement demand-side policies that impose costs on consumers. In the case of imposing costs on producers via supply-side policies, autonomous bureaucracies insulate politicians from industry, while corporatist interest intermediation better enables them to compensate business. To test our theory, we analyze energy transitions among OECD countries after the 1973 oil price shock. Leveraging a difference-in-difference approach, case studies, and network analysis, we find strong evidence that domestic institutions conditioned countries’ policy responses to a common exogenous shock. The paper contributes to our understanding of how institutions shape major economic transitions, providing critical lessons for climate policy and the low-carbon transition.

Please email gri.events@lse.ac.uk with the name of the presenter in order to request the Zoom joining details for this workshop by by 5pm on Tuesday 17th November 2020.