Giacomo Ponzetto is the recipient of a European Research Council Starting Grant for his project, Citizens, Institutions, and Globalization. In this short video, Ponzetto talks about the project’s objectives, challenges, and potential impact for the field and for society.
This project focuses on the interplay between citizens’ political participation, policy-making institutions and globalization. It aims to study which conditions create democratic support for trade- and productivity-enhancing policies; when and why voters support instead measures that hinder trade and reduce aggregate surplus; and how the architecture of government should and does react to globalization.
In particular, the first part of the project studies the puzzling popularity of protectionism and how lobbies can raise it by manipulating information. It will investigate how greater transparency can cause lower trade barriers. It will also study how voter psychology makes concentrated losses more salient than diffuse benefits.
The second part of the project studies inefficient infrastructure policy and the ensuing spatial misallocation of economic activity. It will show that voters’ unequal knowledge lets local residents capture national policy. They disregard nationwide positive externalities, so investment in major cities is insufficient, but also nationwide taxes, so spending in low-density areas is excessive. Moreover, it will consider how behavioral biases cause voter opposition to growth-enhancing policies and efficient incentive schemes like congestion pricing.
The third part of the project studies how the size of countries and international unions adapts to expanding trade opportunities. It will focus on three forces: cultural diversity, economies of scale and scope in government, and trade-reducing border effects. These can explain increasing country size in the nineteenth century; the rise and fall of colonial empires; and the recent emergence of regional and global economic unions, accompanied by a peaceful increase in the number of countries.