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Policy Makers, Advisors, and Reputation

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  • Phongthorn Wrasai

    ()
    (Department of Economics, Erasmus Universiteit Rotterdam)

  • Otto H. Swank

    ()
    (Department of Economics, Erasmus Universiteit Rotterdam)

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

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-037/1.

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Date of creation: 30 Mar 2004
Date of revision: 09 Dec 2004
Handle: RePEc:dgr:uvatin:20040037

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Web page: http://www.tinbergen.nl

Related research

Keywords: Reputation; Signalling; Uncertainty; Policy decision-making;

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  2. Jeffrey C. Ely & Juuso Valimaki, 2002. "Bad Reputation," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1348, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521894753.
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  6. Stephen Morris, 1999. "Political Correctness," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1242, Cowles Foundation for Research in Economics, Yale University.
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  8. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, Econometric Society, vol. 50(6), pages 1431-51, November.
  9. Robert Dur & Otto H. Swank, 2005. "Producing and Manipulating Information," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(500), pages 185-199, 01.
  10. Alesina, Alberto & Tabellini, Guido, 1988. "Credibility and politics," European Economic Review, Elsevier, Elsevier, vol. 32(2-3), pages 542-550, March.
  11. Bendor, Jonathan & Glazer, Ami & Hammond, Thomas H., 2000. "Theories of Delegation in Political Science," Research Papers, Stanford University, Graduate School of Business 1655, Stanford University, Graduate School of Business.
  12. Suurmond, Guido & Swank, Otto H. & Visser, Bauke, 2004. "On the bad reputation of reputational concerns," Journal of Public Economics, Elsevier, Elsevier, vol. 88(12), pages 2817-2838, December.
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Cited by:
  1. LI, Ming & MYLOVANOV, Tymofiy, 2010. "Credibility for Sale - The Effect of Disclosure on Information Acquisition and Transmission," Cahiers de recherche, Centre interuniversitaire de recherche en économie quantitative, CIREQ 08-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  2. Roland Hodler & Simon Loertscher & Dominic Rohner, 2010. "Biased Experts, Costly Lies, and Binary Decisions," Working Papers 10.01, Swiss National Bank, Study Center Gerzensee.
  3. Shun-ichiro Bessho & Kimiko Terai, 2013. "Fiscal restraints by advisors," Economics of Governance, Springer, Springer, vol. 14(3), pages 205-232, August.

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