Economic Policies and Elections. A principal-agent point of view
One of the most crucial lessons to be taken from the literature on electoral business cycles is that short-run electorally-induced fluctuations prejudice long-run welfare. Since the very first studies on the matter, authors have offered suggestions as to what should be done against this electorally-induced instability. As the government’s optimal policies depend crucially on the behaviour of voters, non-representative voting may, indeed, induce the government to behave as the representative of society’s interests. Given that elections are the appropriate mechanism to punish or to reward the behaviour of the incumbent, they can be used to turn voters, i.e. the public, into the principal who has all the incentives to motivate the government, as the agent, to choose appropriate economic policies. The paper analyses the circumstances under which an optimal contract can be established between the electorate and the government in order to guarantee that the government behaves in accordance with the true interests of society.
Volume (Year): (2004)
Issue (Month): 20 (December)
|Contact details of provider:|| Postal: Av. Dias da Silva, 165, 3004-512 COIMBRA|
Phone: + 351 239 790 500
Fax: + 351 239 40 35 11
Web page: http://impactum-journals.uc.pt/index.php/notaseconomicas
More information through EDIRC
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.:
- MacRae, C Duncan, 1977. "A Political Model of the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 239-263, April.