TITLE:
The Political Economy of Policy Instrument Choice: Theory and Evidence from Agricultural and Food Policies
AUTHORS:
Johan Swinnen, Alessandro Olper, Thijs Vandemoortele
KEYWORDS:
Public Policy, Political Economy, Instrument Choice, Agricultural and Food
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.1,
February
26,
2016
ABSTRACT: We study the political
economy of instrument choice with an application to agricultural and food
policies. We present stylized facts on the choice of policy instruments and
develop a political economy theory of instrument choice. The key predictions of
the model suggest a rational explanation of instrument choice patterns, based
on the trade-off between transaction costs and distortions of the policies, and
internal and external political constraints. Our empirical analysis supports
the main predictions of the theoretical model. The shift from
distortionary to less distortionary instruments is positively influenced by
institutional development, a country’s net trade status, and the GATT/WTO
framework.