Off-the-peak preferences over government size
AbstractIn this paper, we analyze the political consequences derived from policy preferences which are non-symmetric around the peak. While the assumption of symmetric preferences is innocuous in political equi- libria with platforms convergence, it is not neutral when candidates are differentiated. Following the citizen-candidate approach, we show that a larger government size emerges when preferences of the me- dian voter off-the-peak are more intense towards overprovision (what we call wasteful preferences), whereas a smaller government results when her preferences are more intense towards underprovision (what we call scrooge preferences). We next study the determinants of the shape of preferences off-the-peak and find that: (i) A positive sign of the third derivative of the policy-induced utility function indicates wasteful preferences, while a negative sign indicates scrooge prefer- ences. (ii) The analog of KimballÕs coefficient of prudence (which is closely related to Arrow-PrattÕs coefficient of risk aversion), can be used to measure degrees of wastefulness and scroogeness. (iii) Symmetric preferences require imposing quite stringent restrictions on the policy problem. Numerical examples illustrate the discrepancies de- rived from symmetric preferences versus scrooge preferences in terms of equilibrium predictions.
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Bibliographic InfoPaper provided by Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center in its series Working Papers with number 2009-9.
Length: 32 pages
Date of creation: Dec 2009
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Single-peaked preferences; citizen-candidate; coefficient of prudence; differentiated platforms; risk-aversion;
Other versions of this item:
- Francisco Martínez Mora & M. Socorro Puy, 2010. "Off-the-peak preferences over government size," Working Papers 2010-05, FEDEA.
- Francisco Martínez-Mora & M. Socorro Puy, 2010. "Off-the-peak preferences over government size," Discussion Papers in Economics 10/04, Department of Economics, University of Leicester.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- H5 - Public Economics - - National Government Expenditures and Related Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-16 (All new papers)
- NEP-CDM-2010-01-16 (Collective Decision-Making)
- NEP-POL-2010-01-16 (Positive Political Economics)
- NEP-PUB-2010-01-16 (Public Finance)
- NEP-UPT-2010-01-16 (Utility Models & Prospect Theory)
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