The BBVA Foundation Frontiers of Knowledge Award in the Economics, Finance and Management category goes, in this fifteenth edition, to Timothy Besley, Torsten Persson and Guido Tabellini for illuminating the connections between the economic and political world.
Persson and Tabellini have written two influential books that combine insights from the macroeconomic literature on time-consistency of policy, public choice, and rational choice to explore how politics interacts with the economy in shaping economic policies. Using evidence from several countries over time, they link features of political structures – like, for example, presidential vs. parliamentary democracies – to taxation, redistributive programs, public good provision, and other economic policies. In an influential paper with Gerard Roland, they argued that a clear separation of the executive and legislative powers subject to proper checks and balances is a way to prevent abuse of power and to guarantee the smooth functioning of a democratic system. In other work, they examined the relationship between inequality, the demand for redistribution, and growth, to show that growth can be negatively affected by inequality. More recently, Tabellini has studied the relationship among identity politics, economic shocks, and polarization.
Besley has studied, in joint work with Steve Coate, the role of partisan politics in an environment where political candidates cannot commit to political compromises. In other work, joint with Anne Case, he considered the effects of U.S. gubernatorial term limits on the size of government, showing that term limits can lead to fiscal cycles. In joint work with Persson, he has studied the determinants and effects of state capacity – that is, the ability of states to collect taxes, provide public goods, and enforce property rights and regulations – and has helped us understand why some countries have remained less developed and fragile.