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Policy makers, advisers, and reputation

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  • Wrasai, Phongthorn
  • Swank, Otto H.

Abstract

When hiring an adviser (he), a policy maker (she) often faces the problem that she has incomplete information about his preferences. Some advisers are good, in the sense that their preferences are closely aligned to the policy maker's preferences, and some advisers are bad. Recently, some scholars have argued that the policy maker's power to replace her adviser induces the adviser to act more in line with the policy maker's interests. The idea is that the adviser's desire to put a stamp on future policy reduces his incentive to manipulate information. This paper shows that the policy maker's power to replace her adviser may harm her. The reason is that this power may have an adverse effect on the behavior of good advisers.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 62 (2007)
Issue (Month): 4 (April)
Pages: 579-590

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Handle: RePEc:eee:jeborg:v:62:y:2007:i:4:p:579-590

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References

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  1. Jeffrey Ely & Jusso Valimaki, 2002. "Bad Reputation," NajEcon Working Paper Reviews 391749000000000514, www.najecon.org.
    • Jeffrey C. Ely & Juuso Valimaki, 2002. "Bad Reputation," Discussion Papers 1348, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. David Kreps & Robert Wilson, 1999. "Reputation and Imperfect Information," Levine's Working Paper Archive 238, David K. Levine.
  3. Robert Dur & Otto H. Swank, 2003. "Producing and Manipulating Information," CESifo Working Paper Series 908, CESifo Group Munich.
  4. Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Scholarly Articles 4554125, Harvard University Department of Economics.
  5. Bendor, Jonathan & Glazer, Ami & Hammond, Thomas H., 2000. "Theories of Delegation in Political Science," Research Papers 1655, Stanford University, Graduate School of Business.
  6. Suurmond, Guido & Swank, Otto H. & Visser, Bauke, 2004. "On the bad reputation of reputational concerns," Journal of Public Economics, Elsevier, vol. 88(12), pages 2817-2838, December.
  7. Paul Milgrom & John Roberts, 1986. "Relying on the Information of Interested Parties," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 18-32, Spring.
  8. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
  9. Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, vol. 32(2-3), pages 542-550, March.
  10. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  11. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  12. Torsten Persson & Gerard Roland & Guido Tabellini, . "Separation of Powers and Political Accountability," Working Papers 100, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  13. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753.
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Cited by:
  1. Li, Ming & Tymofiy Mylovanov, 2009. "Credibility for Sale: the Effect of Disclosure on Information Acquisition and Transmission," Working Papers 09008, Concordia University, Department of Economics, revised Oct 2009.
  2. Roland Hodler & Simon Loertscher & Dominic Rohner, 2010. "Biased experts, costly lies, and binary decisions," IEW - Working Papers 496, Institute for Empirical Research in Economics - University of Zurich.
  3. Shun-ichiro Bessho & Kimiko Terai, 2013. "Fiscal restraints by advisors," Economics of Governance, Springer, vol. 14(3), pages 205-232, August.

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