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Uncertainty, Electoral Incentives and Political Myopia


  • Alessandra Bonfiglioli


  • Gino Gancia



In this paper, we study the determinants of political myopia in a rational model of electoral accountability where the key elements are informational frictions and uncertainty. We build a framework where political ability is ex-ante unknown and policy choices are not perfectly observable. On the one hand, elections improve accountability and allow to keep well-performing incumbents. On the other, politicians invest too little in costly policies with future returns in an attempt to signal high ability and increase their reelection probability. Contrary to the conventional wisdom, uncertainty reduces political myopia and may, under some conditions, increase social welfare. We use the model to study how political rewards can be set so as to maximise social welfare and the desirability of imposing a one-term limit to governments. The predictions of our theory are consistent with a number of stylised facts and with a new empirical observation documented in this paper: aggregate uncertainty, measured by economic volatility, is associated to better ...scal discipline in a panel of 20 OECD countries.

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  • Alessandra Bonfiglioli & Gino Gancia, 2012. "Uncertainty, Electoral Incentives and Political Myopia," UFAE and IAE Working Papers 915.12, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  • Handle: RePEc:aub:autbar:915.12

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    Cited by:

    1. Graziano Abrate & Federico Boffa & Fabrizio Erbetta & Davide Vannoni, 2013. "Corruption, Accountability and Efficiency. An Application to Municipal Solid Waste Services," Working papers 022, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    2. Linda Gonçalves Veiga & Francisco veiga, 2016. "Term limits at the local government level," NIPE Working Papers 7/2016, NIPE - Universidade do Minho.
    3. Albert Solé-Ollé & Elisabet Viladecans-Marsal, 2017. "Housing booms and busts and local fiscal policy," Working Papers 2017/05, Institut d'Economia de Barcelona (IEB).
    4. Guido Merzoni & Federico Trombetta, 2016. "The cost of doing the right thing. A model of populism with rent-seeking politicians and the economic crisis," DISEIS - Quaderni del Dipartimento di Economia internazionale, delle istituzioni e dello sviluppo dis1602, Università Cattolica del Sacro Cuore, Dipartimento di Economia internazionale, delle istituzioni e dello sviluppo (DISEIS).
    5. Graziano Abrate & Federico Boffa & Fabrizio Erbetta & Davide Vannoni, 2016. "Voters' Information, Corruption, and the Efficiency of Local Public Services," Carlo Alberto Notebooks 446, Collegio Carlo Alberto.

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    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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