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Why Do Policy Makers Stick to Inefficient Decisions?

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  • Dur, Robert A J

Abstract

This paper offers an explanation for why policy makers stick to inefficient policy decisions. I argue that repealing a policy is a bad signal to voters about the policy maker's competence if voters do not have complete knowledge about the effects of implemented policies. I derive the optimal policy maker's decision on continuation of a policy, assuming that voters' beliefs about the policy maker's competence are updated according to Bayes' rule. I show that if the policy maker cares sufficiently about reelection, he will never repeal a policy. Copyright 2001 by Kluwer Academic Publishers

Suggested Citation

  • Dur, Robert A J, 2001. "Why Do Policy Makers Stick to Inefficient Decisions?," Public Choice, Springer, vol. 107(3-4), pages 221-234, June.
  • Handle: RePEc:kap:pubcho:v:107:y:2001:i:3-4:p:221-34
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    References listed on IDEAS

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    1. Christian Schultz, 1996. "Polarization and Inefficient Policies," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 331-344.
    2. Wirl, Franz, 1991. "The Political Economics of Wackersdorf: Why Do Politicians Stick to Their Past Decisions?," Public Choice, Springer, vol. 70(3), pages 343-350, June.
    3. Glazer, Amihai & Hassin, Refael, 1998. "Governmental Failures in Evaluating Programs," Public Choice, Springer, vol. 94(1-2), pages 105-115, January.
    4. Amihai Glazer & Bernard Grofman, 1989. "Why representatives are ideologists though voters are not," Public Choice, Springer, vol. 61(1), pages 29-39, April.
    5. Howitt, Peter & Wintrobe, Ronald, 1995. "The political economy of inaction," Journal of Public Economics, Elsevier, vol. 56(3), pages 329-353, March.
    6. Alberto Alesina & Alex Cukierman, 1990. "The Politics of Ambiguity," The Quarterly Journal of Economics, Oxford University Press, pages 829-850.
    7. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    8. Swank, Otto H., 1998. "Towards an economic theory of party ideology," European Journal of Political Economy, Elsevier, vol. 14(2), pages 223-240, May.
    9. 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 1146-1155, December.
    10. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-1188, December.
    11. 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. Mitja Cok & Polona Domadenik & Tjasa Redek & Miroslav Verbic, 2009. "Labour market reforms in the context of political power theory: The case of Slovenia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 27(1), pages 57-82.
    2. Klaas J. Beniers, 2005. "Party Governance and the Selection of Parliamentarians," Tinbergen Institute Discussion Papers 05-080/1, Tinbergen Institute.
    3. Louis Jaeck, 2011. "Information and political failures: to what extent does rational ignorance explain irrational beliefs formation?," Constitutional Political Economy, Springer, vol. 22(3), pages 287-301, September.
    4. Pitlik, Hans & Wirth, Steffen, 2003. "Do crises promote the extent of economic liberalization?: an empirical test," European Journal of Political Economy, Elsevier, vol. 19(3), pages 565-581, September.
    5. Klaas Beniers & Robert Dur, 2007. "Politicians’ motivation, political culture, and electoral competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(1), pages 29-54, February.
    6. Edomah, Norbert & Foulds, Chris & Jones, Aled, 2017. "Policy making and energy infrastructure change: A Nigerian case study of energy governance in the electricity sector," Energy Policy, Elsevier, vol. 102(C), pages 476-485.
    7. Yoh, Allison & Taylor, Brian D. & Gahbauer, John, 2012. "Does Transit Mean Business? Reconciling academic, organizational, and political perspectives on Reforming Transit Fare Policies," University of California Transportation Center, Working Papers qt6dv295b7, University of California Transportation Center.
    8. Klaas J. Beniers & Robert Dur, 2004. "Politicians’ Motivation, Political Culture, and Electoral Competition," CESifo Working Paper Series 1228, CESifo Group Munich.
    9. Kimiko Terai & Amihai Glazer, 2015. "Principal-Agent Problems When Principal Allocates a Budget," Keio-IES Discussion Paper Series 2015-012, Institute for Economics Studies, Keio University.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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