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Inattentive Voters and Welfare-State Persistence

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  • Christian Bredemeier

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Abstract

Welfare-state measures often tend to persist even when they seem to have become suboptimal due to changes in the economic environment. This paper proposes an information-based explanation for the persistence of the welfare state. I present a structural model where rationally inattentive voters decide upon implementations and removals of social insurance. In this model, welfare-state persistence arises from disincentive effects of social insurance on attentiveness. The welfare state crowds out private financial precautions and with it agents‘ attentiveness to changes in economic fundamentals. When welfare-state arrangements are pronounced, agents realize changes in economic fundamentals later and reforms have considerable delays.

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Bibliographic Info

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0214.

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Length: 46 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:rwi:repape:0214

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Related research

Keywords: Welfare state; voting; imperfect information;

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