General Institutional Equilibrium: Theory and Policy Implications (completed)
European Research Council (ERC) Starting Grant 283236
2012 – 2016
About the project
Theory: The GInE project aims at developing a coherent theory of the organizational design of political and economic institutions with an emphasis on how they interact. In a partial equilibrium setting, contract theory must be extended to permit the agent to be an institution, perhaps endogenously choosing its organizational design. In a general equilibrium setting, several institutions must be permitted to be endogenous at the same time.
Applications: The theory is necessary to better understand how environmental agreements should be designed, how federal policies should be implemented given local institutions, and what development aid should be conditional on. Thus, the theory will be built on and for several applications in political economics, public economics, environmental economics, and international/development economics.
The theoretical as well as the applied part consist of three stages:
|Theory||Applications and Examples|
How must existing contract theory be modified when the “agent” is an organization or an institution?
(a) Development aid contracts as functions of the local governance structure
|Stage 2:||What is the optimal institutional design given its tasks and the environment?||(c) The optimal climate agreement depends on the design of local institutions
(d) Local governance structures depend on the international political environment
|Stage 3:||What is the general institutional equilibrium when multiple institutions are endogenous simultaneously?||(e) Environmental agreement designs and local governance structures interact
(f) One country’s privatization of public utilities triggers privatization abroad
The principal investigator
Bård Harstad is a professor at the University of Oslo. Until 2013, he held the Max McGraw Chair in Management & Environment at Kellogg School of Management, Northwestern University.