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Title: Essays on political economics : intergenerational resource conflicts and international labour standard
Author: Hwang, U.
Awarding Body: University of Cambridge
Current Institution: University of Cambridge
Date of Award: 2005
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This thesis studies some issues related to intergenerational conflicts and resource management and international labour standards within a political economics framework. The thesis includes a collection of four self-contained essays. The thesis is based on the idea that politics is an essential factor in the formation of economic policy. We argue that policy making should be viewed as an endogenous process in which the interests of politicians, voters and lobby groups over the relevant policy are traded off. In chapter 2, we study the political economy of resource management in an OLG framework with an intertemporal externality problem. The externality arises because a common resource used for production is depleted by production of “dirty” goods. An intergenerational conflict arises because the young generation cares about the level of current production of dirty goods. This is so because production of dirty goods affects the future availability of the resource. The old, on the other hand, has no such concern, and tries to maximise current resources use. We assume that the interests of the two generations are represented by two pressure groups. They lobby the government to affect the policy choice – an upper limit on the resource use allowed for production of dirty goods – in their favour. The game between the two lobby groups and the government is modelled as a dynamic common agency. We study stationary equilibria focussing on a particular class of strategies which we called “Take It or Leave It” (TIOLI) strategies, where a principal makes a positive contribution only when her payoff maximising policy is implemented. It is shown that political competition may lead to a “greener” environment policy and to less resource exploitation than in an unregulated economy. More surprisingly, we also find that resource exploitation may be lower in political equilibrium than in an economy run by a social planner. In chapter 3, we consider a simple two-period version of the model analysed in chapter 2 and study political equilibria in “truthful” strategies, as suggested by Bernheim and Whinston (1986). In contrast to the “TIOLI” strategy equilibrium, the “truthful” equilibrium is efficient. The comparison between the truthful and the TIOLI equilibrium highlights the difference between the logic of political compromise and that of partisan politics. Chapter 4 investigates the controversial relationship between labour standards and globalisation (a fall in transportation costs) within a two factor-two sector Heckscher-Ohlin-Mayer political-economy trade model. The right to collective bargaining is one of the core labour standards. Chapter 5 develops a two-country model of political competition between industry lobbies and unions that can explain regulation that relate to this labour standard. We compare equilibrium outcomes in a number of different institutional frameworks.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available