political economy


Financing the green transition: The political economy of investment tax credits

Green policies create economic winners and losers and the unequal distribution of these gains and losses across the population raises questions about the political viability of such measures. This column explores how best to finance the green transition, presenting evidence from a theoretical study of the impact of the introduction of Incentive Tax Credits (ITCs) into a model economy. The authors argue that a mix of debt- and tax-financed ITCs can be used to incentivise investment in green capital, while guaranteeing that most of the population would support the scheme, both at the time of introduction and in the distant future. Without viable political support, there is little hope of getting urgently required policies off the ground.

Urban political structures and the historical roots of wealth inequality

The evolution of wealth inequality is driven in part by past political structures. This column presents a case study from Germany, focusing on the history of the southern city-state, Nördlingen. The results of the study highlight how past political elites were able to exploit extreme moments of crisis, such as wars and epidemics, to enrich themselves, driving up wealth inequality. In fact, the extent to which a region had an oligarchic political structure transpires to be a clear driver of wealth inequality trends, today as in the past.