Habit formation, strategic extremism and debt policy

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Habit formation, strategic extremism and debt policy

Author Info

Egil Matsen () (Department of Economics, Norwegian University of Science and Technology)
Øystein Thøgersen () (Department of Economics, Norwegian School of Economics and Business Administration, and CESifo,)

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Egil Matsen

Abstract

We suggest a probabilistic voting model where voters’ preferences for alternative public goods display habit formation. Current policies determine habit levels and in turn the future preferences of the voters. This allows the incumbent to act strategically in order to influence the probability of re-election. Comparing to a benchmark case of a certain re-election, we demonstrate that the incumbent’s optimal policy features both a more polarized allocation between the alternative public goods and a debt bias.

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Publisher Info
Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 9007.

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Length: 18 pages
Date of creation: 11 Dec 2007
Date of revision:
Handle: RePEc:nst:samfok:9007

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Paper
- Matsen, Egil / Thøgersen, Øystein, 2007. "Habit Formation, Strategic Extremism and Debt Policy," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-01-05 (All new papers)
NEP-CDM-2008-01-05 (Collective Decision-Making)
NEP-POL-2008-01-05 (Positive Political Economics)

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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- Alesina, Alberto F & Tabellini, Guido, 1988. "Voting on the Budget Deficit," CEPR Discussion Papers 269, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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