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Politician's Reputation and Policy (Un)persistence

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  • Iconio Garrì

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    (Università Cattolica)

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    Abstract

    We consider a political career concern model where politicians differ in their information on the states of the world in different periods and the outcome of a policy in different periods depends on the same state of the world. We show that a politician may continue to implement the past policy even when a policy change would be socially preferable (perverse policy persistence): changing his mind would indeed damage his reputation, and so reduce his probability of being reelected. Under the standard assumption that once ousted from office a politician cannot run again for election, the old politician is never reelected (incumbency disadvantage). However, when there is a positive probability that a politician who was ousted from office in the past will stand for reelection in the future, reputational concern may induce a new politician not to continue the policy introduced by another politician even when this is not socially desirable (perverse policy unpersistence): confirming a previous decision made by another politician would indeed improve the reputation of a potential rival in the next elections, and so reduce his probability of being reelected. When equilibrium exhibits policy persistence by the incumbent politician and policy unpersistence by the new politician, the voters' choice between the two politicians is actually a choice between changing or not changing the policy introduced in the previous period. Since politicians have policy expertise, voters believe that the initial policy is more likely to be the optimal one, and so they reelect the candidate who implemented it, i.e., the incumbent politician (incumbency advantage).

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    File URL: http://www.unicatt.it/Istituti/TeoriaEconomica/Quaderni/itemq0851.pdf
    File Function: First version, 2008
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    Bibliographic Info

    Paper provided by Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) in its series DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi with number itemq0851.

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    Length: nn pages
    Date of creation: Sep 2008
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    Handle: RePEc:ctc:serie6:itemq0851

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    Web page: http://www.unicatt.it/Istituti/TeoriaEconomica
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    Keywords: Policy persistence; policy unpersistence; reputation; incumbency advantage; incumbency disadvantage; bad reputation.;

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    1. Schultz, Christian, 2008. "Information, polarization and term length in democracy," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1078-1091, June.
    2. 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.
    3. 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.
    4. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    5. Banks, Jeffrey S. & Sundaram, Rangarajan K., 1998. "Optimal Retention in Agency Problems," Journal of Economic Theory, Elsevier, vol. 82(2), pages 293-323, October.
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