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Policy Gambles

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  • Sumon Majumdar
  • Sharun W. Mukand

Abstract

This paper develops a theory of policy making, that examines the incentives for experimentation with new policies and the scrappage of adopted policies. We demonstrate that a government which cares about its reputation out of electoral concerns, takes socially ine?cient policy gambles that may result in two kinds of ine?ciencies ? Þrst, a government may ine?ciently experiment by undertaking a new policy initiative that it (and the voter) knows is unlikely to succeed, and second, the government may prefer to not learn from experience and instead persist with an adopted policy despite publicly observable evidence of its failure. Furthermore, these ine?ciencies are systematically related to the electoral cycle. Early on in its term a government is likely to enact policies that are either too conservative or too radical, while later on in its term the government is likely to show ine?cient policy persistence.

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Bibliographic Info

Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0407.

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Date of creation: 2004
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Handle: RePEc:tuf:tuftec:0407

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Related research

Keywords: Learning; Policy Persistence; Policy Experimentation; Leadership; Reputation;

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References

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  1. Eric Maskin, 2003. "The Politician and the Judge: Accountability in Government," Theory workshop papers 505798000000000076, UCLA Department of Economics.
  2. Cukierman, Alex & Tommasi, Mariano, 1998. "When Does It Take a Nixon to Go to China?," American Economic Review, American Economic Association, vol. 88(1), pages 180-97, March.
  3. Stephen Morris & Stephen Coate, 1999. "Policy Persistence," American Economic Review, American Economic Association, vol. 89(5), pages 1327-1336, December.
  4. Roland Bénabou & Jean Tirole, 2006. "Belief in a Just World and Redistributive Politics," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 699-746, May.
  5. Mariano Tommasi, 1995. "Where are we in the Political Economy of Reform?," UCLA Economics Working Papers 733, UCLA Department of Economics.
  6. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
  7. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
  8. Harrington, Joseph E, Jr, 1993. "Economic Policy, Economic Performance, and Elections," American Economic Review, American Economic Association, vol. 83(1), pages 27-42, March.
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Citations

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Cited by:
  1. Fu, Qiang & Li, Ming, 2014. "Reputation-concerned policy makers and institutional status quo bias," Journal of Public Economics, Elsevier, vol. 110(C), pages 15-25.
  2. FU, Qiang & LI, Ming, 2010. "Policy Making with Reputation Concerns," Cahiers de recherche 09-2010, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  3. Tim Willems, 2013. "Political Accountability and Policy Experimentation: Why to Elect Left-Handed Politicians?," Economics Series Working Papers 647, University of Oxford, Department of Economics.
  4. Liu, Yaozhou Franklin & Sanyal, Amal, 2012. "When second opinions hurt: A model of expert advice under career concerns," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 1-16.
  5. Binswanger, J. & Oechslin, M., 2014. "Disagreement and Learning About Reforms," Discussion Paper 2014-020, Tilburg University, Center for Economic Research.
  6. Mukand, Sharun W., 2006. "Globalization and the `confidence game'," Journal of International Economics, Elsevier, vol. 70(2), pages 406-427, December.
  7. Klaas J. Beniers, 2005. "Party Governance and the Selection of Parliamentarians," Tinbergen Institute Discussion Papers 05-080/1, Tinbergen Institute.
  8. Klaas J. Beniers & Robert Dur, 2004. "Politicians’ Motivation, Political Culture, and Electoral Competition," CESifo Working Paper Series 1228, CESifo Group Munich.
  9. Amihai Glazer, 2012. "Handicaps on Timing to Improve Reputation," Working Papers 111210, University of California-Irvine, Department of Economics.
  10. Schuett, Florian & Wagner, Alexander K., 2011. "Hindsight-biased evaluation of political decision makers," Journal of Public Economics, Elsevier, vol. 95(11), pages 1621-1634.
  11. Arghya Ghosh & Kieron Meagher, 2011. "The Political Economy of Infrastructure Investment: Competition, Collusion and Uncertainty," ANU Working Papers in Economics and Econometrics 2011-556, Australian National University, College of Business and Economics, School of Economics.
  12. Klaas J. Beniers, 2005. "Party Governance and the Selection of Parliamentarians," Tinbergen Institute Discussion Papers 05-080/1, Tinbergen Institute.
  13. Eliasson , Jonas & Proost, Stef, 2014. "Is sustainable transport policy sustainable?," Working papers in Transport Economics 2014:2, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
  14. Honryo, Takakazu, 2013. "Signaling Competence in Elections," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 442, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  15. Justin Fox, 2007. "Government transparency and policymaking," Public Choice, Springer, vol. 131(1), pages 23-44, April.
  16. Di Maggio, Marco, 2009. "Accountability and Cheap Talk," MPRA Paper 18652, University Library of Munich, Germany.

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