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Read My Lips: The Political Economy of Information Transmission

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  • Timothy Besley
  • Rohini Pande

Abstract

The paper studies credible information transmission by governments. A group of heterogenous individuals have to make private investment and labour supply decisions while relying on the government for information about investment returns. The government consists of an elected citizen who chooses a redistributive strategy in addition to providing information. We give conditions under which the outcome leads to over- or under-investment in high-return activities and the outcome is Pareto efficient.

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File URL: http://sticerd.lse.ac.uk/dps/te/te355.pdf
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Bibliographic Info

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Theoretical Economics Paper Series with number 355.

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Date of creation: Jul 1998
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Handle: RePEc:cep:stitep:355

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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

Related research

Keywords: Political economy; cheap talk; redistribution; development;

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References

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  1. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
  2. Feddersen, Timothy J & Pesendorfer, Wolfgang, 1996. "The Swing Voter's Curse," American Economic Review, American Economic Association, vol. 86(3), pages 408-24, June.
  3. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Tim Besley & Stephen Coate, . "An Economic Model of Representative Democracy," Penn CARESS Working Papers ecf70d639d700dba5327ab0c8, Penn Economics Department.
  5. V. Crawford & J. Sobel, 2010. "Strategic Information Transmission," Levine's Working Paper Archive 544, David K. Levine.
  6. Osborne, Martin J & Slivinski, Al, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 65-96, February.
  7. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-35, December.
  8. Matthews, Steven A, 1989. "Veto Threats: Rhetoric in a Bargaining Game," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 347-69, May.
  9. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  10. Stein, Jeremy C, 1989. "Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements," American Economic Review, American Economic Association, vol. 79(1), pages 32-42, March.
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Cited by:
  1. Roger Lagunoff, 2002. "Credible Communication in Dynastic Government," Wallis Working Papers WP34, University of Rochester - Wallis Institute of Political Economy.
  2. Heidhues, Paul & Lagerlof, Johan, 2003. "Hiding information in electoral competition," Games and Economic Behavior, Elsevier, vol. 42(1), pages 48-74, January.

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