A Political Winner’s Curse: Why Preventive Policies Pass Parliament so Narrowly
AbstractPreventive policy measures such as bailouts often pass parliament very narrowly. We present a model of asymmetric information between politicians and voters which rationalizes this narrow parliamentary outcome. A successful preventive policy impedes the verification of its own necessity. When policy intervention is necessary but voters disagree ex-ante, individual politicians have an incentive to loose the vote in parliament in order to be rewarded by voters ex-post. Comfortable vote margins induce incentives to move to the loosing fraction to avoid this winner’s curse. In equilibrium, parliamentary elections over preventive policies are thus likely to end at very narrow margins.
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Bibliographic InfoPaper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0336.
Length: 27 pages
Date of creation: May 2012
Date of revision:
Find related papers by JEL classification:
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
- NEP-CDM-2012-07-23 (Collective Decision-Making)
- NEP-CTA-2012-07-23 (Contract Theory & Applications)
- NEP-POL-2012-07-23 (Positive Political Economics)
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