The interaction between political economy and population economics is a fascinating and intriguing subject area, yielding insights into public policy formation, voting, campaigning, lobbying, and other political processes. Its implications concern the distribution of income and wealth, the size and form of redistributive programs, the extent and type of public goods provision, the distribution of the tax burden across alternative tax bases, the size of government deficits, and the government’s monetary stance in the course of business and electoral cycles.

Much of the recent political economy literature analyzes the interrelationship between economic and political processes under the assumption that the institutional setting is given (see Persson and Tabellini 2000; Grossman and Helpman 2001; Epstein and Nitzan 2006a for reviews). In this subliterature, policy is determined either by the preferences of the median voter or by those of rent-seeking politicians and interest groups. Policy maximizes an objective function that takes into consideration, in some measure, both social welfare and the policy maker’s own interests (Epstein and Nitzan 2006a). A smaller subliterature is concerned with the emergence of norms and institutions that encourage cooperative behavior and reduce the risk of inefficient equilibria (for a review focused on intergenerational relations, see Cigno 2006a).

Political economy is not only about the state but also about lower level communities such as the workplace or the family. Decisions taken within the latter affect not only family members but also the rest of the population. Cigno (2006b, in this issue) investigates the properties of renegotiation-proof family constitutions, with and without parental altruism, and illustrates their policy implications by showing the behavioral effects of public pensions and credit rationing. Azarnet (2006, in this issue) argues that education and mortality may be correlated both at the family and at national level. If child mortality occurs before education starts, a decline in mortality leads to a decline in education.

Family formation is affected by culture and place of residence. Migration leads to intermarriage. Families migrating from one country to another bring their culture and customs with them while, at the same time, adapting to a new way of life. This interaction creates new cultures, promotes the consumption of ethnic goods, and introduces new lifestyles. Many long-standing residents are afraid of change and do not want immigration. On the other hand, in countries that suffer from a shortage of human resources as a result of below-replacement fertility, many have an interest in importing young migrants. In host countries, politicians compete on the basis of electoral platforms for or against immigration (in source countries, on the basis of electoral platforms for or against emigration).

Among the existing contributions regarding the interaction between migration policy and political economy, Amegashie (2004) and Epstein and Nitzan (2006b) show how interest groups, politicians, and economic structure determine migration quotas. Epstein and Hillman (2003) argue that migrants can be used by the policy maker as a device for disciplining local workers. Kemnitz (2006, in this issue) shows how the admittance of immigrants who are less skilled, on average, than natives can be part of a support-maximizing government policy despite a general political bias in favor of the poor. Dula et al. (2006, in this issue) show how a host country can use foreign aid as a means to bounce the struggle against illegal immigration back to the source countries.

One of the problems with migration is that immigrants are seen as minorities. The political and economic issues associated with minorities go back decades and follow us to our days. Minorities, such as ethnic and immigration groups, are often subject to exclusion through labor market discrimination, residential and employment segregation policies, business ownership regulations, restrictions on political participation, access to public services, and the like. From the viewpoint of the majority, the exclusion decision is the result of a compromise between a desire to redistribute income in the majority’s own favor and a concern for possible civil unrest, or even violent confrontation with the minority (Gradstein and Schiff 2006, in this issue). These considerations affect electoral platforms, actual policy, and the development of the culture and composition of the local population.

Voting behavior concerns not only minority and migration issues but also policies such as taxation, social security, welfare, and public education. Policy is often determined by the preferences of the median voter (Poutvaara 2006, in this issue). Altruism also plays a role in voting and public policy formation (Soares 2006, in this issue). In countries characterized by strong regional differences, it may well be that regions considered low risk will subsidize higher risk ones (Pallage and Zimmermann 2006, in this issue). Dealing effectively with migration problems may require international coordination. The Common European Asylum System calls for increased coordination of EU countries’ policies toward asylum seekers and refugees (Facchini et al. 2006, in this issue).

The interaction between political economy and population economics may reach as far as gender discrimination. For example, a politically unstable country may feel the need for large armed forces, and thus for a large supply of young men. The government might then boost population growth by keeping women out of production activities (Lehmijoki and Palokangas 2006, in this issue).

In conclusion, the interaction between political economy and population economics starts at the individual level, and works it way up through family units, eventually ending up in national political processes. This interaction has an important impact on our day to day lives, affecting the evolution of cultures and populations all over the world. Though it has a lineage of over 200 years, the work in this area is still in its infancy. Many questions remain to be answered, and more have yet to be asked.