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Institutional Bias Towards The Status Quo

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  • Dalibor Eterovic

Abstract

Some societies appear to be better equipped than others to implement efficiency enhancing policy reforms and to deliver positive results out of their implementation. Our model presents an under-examined element of policy reform and institutional quality, showing how the characteristics of the political system may render citizens unable to properly reward politicians who implement new projects, thus favoring politicians who secure the status quo, albeit mediocre, of the economy. In such an environment, new policy projects are sidelined and political institutional quality remains inert. Political institutions matter because they affect the value for the politicians of staying in office. We show that societies with a suboptimal political system may present institutional bias towards the status quo. This bias arises due to the inability of the citizens to design an effective voting rule that induces politicians to implement new projects successfully.

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  • Dalibor Eterovic, 2009. "Institutional Bias Towards The Status Quo," Working Papers Central Bank of Chile 543, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:543
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    Cited by:

    1. Rodrigo A. Alfaro & Rodrigo Cifuentes S., 2011. "Financial Stability, Monetary Policy, and Central Banking: An Overview," Central Banking, Analysis, and Economic Policies Book Series, in: Rodrigo Alfaro (ed.),Financial Stability, Monetary Policy, and Central Banking, edition 1, volume 15, chapter 1, pages 001-010, Central Bank of Chile.
    2. David Aikman & Piergiorgio Alessandri & Bruno Eklund & Prasanna Gai & Sujit Kapadia & Elizabeth Martin & Nada Mora & Gabriel Sterne & Matthew Willison, 2011. "Funding Liquidity Risk in a Quantitative Model of Systemic Stability," Central Banking, Analysis, and Economic Policies Book Series, in: Rodrigo Alfaro (ed.),Financial Stability, Monetary Policy, and Central Banking, edition 1, volume 15, chapter 12, pages 371-410, Central Bank of Chile.
    3. Pablo Pincheira, 2010. "A Real Time Evaluation of the Central Bank of Chile GDP Growth Forecasts," Money Affairs, CEMLA, vol. 0(1), pages 37-73, January-J.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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