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Hyperbolic Discounting and Politics: The beneficial effects of bureaucrats

Listed author(s):
  • Marcus Drometer

This paper introduces hyperbolic discounting into politics. In our model, politicians act according to the preferences of voters in order to be re-elected. As voters' preferences are dynamically inconsistent, the political process results in an allocation of the public budget that is distorted towards consumption ex- penditures. We show that this inefficiency is mitigated when the influence of bureaucrats who favour an excessive supply of public goods is taken into ac- count. Finally, we derive a positive relationship between the optimal level of a bureaucracy's influence and the relevance of long-term investments in a given policy area.

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File URL: http://www.bgpe.de/texte/DP/008_drometer.pdf
File Function: First version, 2006
Download Restriction: no

Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 008.

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Length: 20 pages
Date of creation: Nov 2006
Handle: RePEc:bav:wpaper:008_drometer
Contact details of provider: Web page: http://www.bgpe.de/

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  1. Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, vol. 14(1), pages 19-42, March.
  2. Besley, Timothy J. & Coate, Stephen, 2000. "Elected Versus Appointed Regulators: Theory And Evidence," CEPR Discussion Papers 2381, C.E.P.R. Discussion Papers.
  3. Faruk Gul & Wolfgang Pesendorfer, 2003. "Self-control, revealed preference and consumption choice," Levine's Working Paper Archive 506439000000000362, David K. Levine.
  4. Rauch, James E & Evans, Peter B., 1999. "Bureaucratic Structure and Bureaucratic Performance in Less Developed Countries," University of California at San Diego, Economics Working Paper Series qt0sb0w38d, Department of Economics, UC San Diego.
  5. Besley, Timothy & Persson, Torsten & Sturm, Daniel, 2006. "Political Competition and Economic Performance: Theory and Evidence from the United States," Discussion Papers in Economics 769, University of Munich, Department of Economics.
  6. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  7. Shapiro, Jesse M., 2005. "Is there a daily discount rate? Evidence from the food stamp nutrition cycle," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 303-325, February.
  8. Shi, Min & Svensson, Jakob, 2006. "Political budget cycles: Do they differ across countries and why?," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1367-1389, September.
  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. Fuest, Clemens, 2000. "The Political Economy of Tax Coordination as a Bargaining Game between Bureaucrats and Politicians," Public Choice, Springer, vol. 103(3-4), pages 357-382, June.
  11. B. Douglas Bernheim & Antonio Rangel, 2005. "Behavioral Public Economics: Welfare and Policy Analysis with Non-Standard Decision-Makers," NBER Working Papers 11518, National Bureau of Economic Research, Inc.
  12. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
  13. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
  14. William D. Nordhaus, 1975. "The Political Business Cycle," Review of Economic Studies, Oxford University Press, vol. 42(2), pages 169-190.
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