The economics of public policy : interventions in electoral representation, information transmission and investment choices

This thesis consists of three papers on the economics of public policy. The first chapter of the thesis provides a selective overview of the existing political economy literature. The second chapter analyzes the relationship between the political representation afforded to members of a disadvantaged population group and public policies. The starting point of the analysis is the observation that disadvantaged groups tend also to constitute population minorities. The chapter examines the success of an electoral law which enhances the political power of a minority group by reserving seats for them in legislatures in promoting minority interests. It develops a theoretical model of the political process to analyze the policy impact of such a law. It also takes advantage of the existence of such a law in India to empirically test this prediction. Chapters 3 and 4 of the thesis turn to an analysis of the relationship between the control rights given to a government and policy outcomes. Chapter 3 examines the relationship between a government's redistributive preference and its ability to provide a public good-information. To do so, it develops a model in which a group of heterogenous individuals have to make private investment and labour supply decisions while relying on the government for information about investment returns. The government consists of an elected citizen who chooses a redistributive strategy in addition to providing information. The chapter identifies reasons why redistributive motives may limit the possibility of credible information transmission by elected governments and lead to under-exploitation of profitable investment opportunities. Chapter 4 of the thesis turns to an analysis of some of the economic and political determinants of industrialisation in underdeveloped agrarian economies. It develops a simple model of an economy in which industrialisation may be inhibited by an investment co-ordination failure amongst landowners. It then examines the possibility of government-led coordination of investment activity. The chapter identifies reasons why the possibility of successful coordination of investment activity on the part of elected governments is sensitive both to the economy's underlying income distribution and to the set of policy instruments available to the government.