Ideological Polarization, Sticky Information, and Policy Reforms

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Ideological Polarization, Sticky Information, and Policy Reforms

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Tomer Blumkin ()
Volker Grossmann ()

Additional information is available for the following registered author(s):

Volker Grossmann

Abstract

We develop a dynamic two-party political economy framework, in which parties seek to maximize vote share and face the trade-off between catering to their respective core constituencies on the one hand and ‘middle of the road’ voters with no partisan affiliation on the other hand. In contrast to ideology-driven individuals, ‘middle of the road’ voters care about the state of the economy in the sense that a policy reform is desirable for them when the fundamentals of the economy change. However, information is “sticky” in the sense that the process of information diffusion about the state of the economy, which is determined by some exogenous stochastic process, is imperfect. Contrary to conventional wisdom, we show that an increase in ideological polarization may enhance social welfare by mitigating the friction in information flow.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1274.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1274

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Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

This paper has been announced in the following NEP Reports:

NEP-PBE-2004-11-07 (Public Economics)
NEP-REG-2004-11-07 (Regulation)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Other versions:
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Aleksander Berentsen & Esther Bruegger & Simon Loertscher, 2005. "Learning, voting and the information trap," Diskussionsschriften dp0516, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]

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