1st Edition

Political Economy and Policy Analysis

By Antonio Merlo Copyright 2019
    236 Pages 55 B/W Illustrations
    by Routledge

    236 Pages 55 B/W Illustrations
    by Routledge

    Most of economics takes politics for granted. Through some (often implausible) assumptions, it seeks to explain away political structures by characterizing them as stable and predictable or as inconsequential in understanding what goes on in an economy. Such attempts are misguided, and this book shows how governments and political institutions are composed of people who respond to incentives and whose behavior and choices can be studied through the lens of economics.

    This book aims to bridge the gap between economics and politics, and in doing so hopes to instill in the reader a deeper appreciation for social scientific thinking. Opening with a refresher on microeconomics and an introduction to the toolkit of political economy, it ensures that the necessary building blocks are in place before building up from the level of the individual and the firm to show how a political–economic equilibrium can be achieved. The text explores how to separate primitives—the external parts of a model that we cannot affect—from outcomes—the internal parts of a model that we can. Moreover, it demonstrates that economic and political issues alike can be studied within the same general framework of analysis.

    Political Economy and Policy Analysis offers readers the chance to gain a more sophisticated understanding of political processes, economic processes, and the interplay among them. Adopting an applied microeconomics approach, it will be ideal for upper-level undergraduate or postgraduate courses on political economy, public choice, or policy analysis.

     A complementary workbook with exercises and solutions that accompanies Political Economy and Policy Analysis is available for download under the eResources tab at: https://www.routledge.com/Political-Economy-and-Policy-Analysis/Merlo/p/book/9781138591783.


    1. Overview and Introduction

    2. Basic Tools of Microeconomics

    3. Basic Tools of Political Economics

    4. Voters

    5. Electoral Competition

    6. Parties

    7. Lobbies

    8. Political Careers

    9. Public Goods

    10. Public Schools

    11. Higher Education

    12. Redistribution

    13. Health Care

    14. Mobility



    Antonio Merlo is the Dean of the School of Social Sciences and the George A. Peterkin Professor of Economics at Rice University, USA. He is also the founding and current director of the Rice Initiative for the Study of Economics (RISE). In 2012, he was elected a Fellow of the Econometric Society. His areas of expertise are political economy, policy analysis, public economics, bargaining theory and applications, and empirical microeconomics.

    "Antonio Merlo has written an outstanding text on the economic foundations of political economy and policy analysis. The book is written in an engaging style with accessible models and applications to education, health care, and redistribution policy.", David P. Baron, Davis S. and Ann M. Barlow Professor Emeritus of Political Economy and Strategy, Stanford University, USA

    "This book on Political Economy and Policy Analysis provides a theoretically rigorous treatment of a wide range of topics of current interest. The exposition is extremely clear and accessible. The Discussion section at the end of each chapter provides an overview of the recent literature on the topics covered, and places them in the context of current events. It would be a pleasure to learn from this excellent advanced undergraduate textbook, or to teach from it.", Jess Benhabib, Paulette Goddard Professor of Political Economy, New York University, USA

    "This book equips students to explore a range of important policy issues that require insights from economics and political science. The analysis presented reflects a range of recent developments that have transformed the field in recent years once again putting political economy back in the mainstream of economics. It is suited for a wide range of students who wish to advance their understanding of policy-making processes.", Sir Timothy Besley, School Professor of Economics and Political Science & W. Arthur Lewis Professor of Development Economics, London School of Economics, UK

    "The field of political economy has long lacked a suitable undergraduate textbook. Antonio Merlo has written a rigorous and engaging book that meets this need. The book expertly shows students how to combine economics and politics to shed light on contemporary policy issues.", Stephen Coate, Kiplinger Professor of Public Policy, Cornell University, USA

    "Merlo provides an excellent introduction to political economy, which I highly recommend to advanced undergraduate students, or anyone looking for a formal introduction to the field.", Christopher S. Cotton, Professor of Economics, Queen’s University, Canada

    "Has the interrelationship between economics and politics ever been more apparent? Economics students need to understand political processes when evaluating economic policies, while politics students need to understand the workings of the economy to appreciate the political forces at work. Who better to guide the student through these subtle interdependencies than Professor Antonio Merlo. With characteristic clarity and insight, this book melds the study of economics and politics into one, integrated whole.", Gene M. Grossman, Jacob Viner Professor of International Economics, Princeton University, USA

    "As a fine theorist and first-rate empiricist, Antonio Merlo’s scholarship has been at the frontier of political economy. We now have a well-motivated text that shares his journey. Happily for us there are no missteps. The path is direct, well lit, and free of tangles.", Robert P. Inman, Richard K. Mellon Professor, Wharton School, University of Pennsylvania, USA

    "In this book, Antonio Merlo teaches us to apply economic analysis for a deeper understanding of public policy-making and political competition. Teachers and students will appreciate the breadth and clarity of the presentation, from fundamental principles of economics to major policy issues of our time.", Roger B. Myerson, Nobel Laureate and Glen A. Lloyd Distinguished Service Professor, University of Chicago, USA

    "Throughout the twentieth century the academic study of economics became increasingly divorced from the political environment in which economic activity took place despite the increasing importance of politics on economic decisions. More recently there has been pioneering academic work that includes politics in economic analysis. This wonderfully clear book makes available to undergraduates this work on the interconnection of politics and economics.", Andrew Postlewaite, Harry P. Kamen Professor of Economics, University of Pennsylvania, USA

    "Merlo has assembled a rigorous political economy text, broad in scope. Books like this are what's needed to properly educate the next generation of social scientists.", Kenneth A. Shepsle, George D. Markham Professor of Government, Harvard University, USA

    "This scholarly and well-researched text is just right for the resurgent and growing contemporary interest in the field of political economy and philosophy. Rigorously developed and simply explicated models of local and national politicians and voter decision, with many applications, form the foundation of this text. An excellent framework for learning, thinking and doing.", Vernon L. Smith, Nobel Laureate and George L. Argyros Endowed Chair in Finance and Economics, Chapman University, USA

    "Antonio Merlo has written a very fine, useful, and comprehensive textbook that extremely clearly sets out various branches of theory that underpin political economy, public choices, and policies. In the present environment, where students will want to understand the acquisition, use, and impact of political power and the representation of `interests’, Merlo’s textbook is an essential complement to standard economic theory. It is both demanding and rewarding.", A. Michael Spence, Nobel Laureate and William R. Berkley Professor of Economics and Business, New York University, USA