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Policy Myopia

  • Aidt, T.
  • Dutta, J.
  • Loukoianova, E.

This paper develops a theory of policy myopia. Policy myopia arises when rational voters set performance standards that allow elected politicians to distort the portfolio of public investments towards short-term investments. We show that the fact that voters cannot observe immediately how much politicians invested in certain types of public goods is not in itself sufficient to generate policy myopia. Policy myopia, then, arises in societies where electoral control is imperfect or in society where tax revenues cannot be committed in advance. The analysis is motivated by a number of stylized facts about public spending patterns across time and space.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0344.pdf
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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0344.

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Length: 33
Date of creation: Oct 2003
Date of revision:
Handle: RePEc:cam:camdae:0344
Note: PE, Ma
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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  1. William D. Nordhaus, 1975. "The Political Business Cycle," Review of Economic Studies, Oxford University Press, vol. 42(2), pages 169-190.
  2. Rodrik, Dani, 1996. "Why do More Open Economies Have Bigger Governments?," CEPR Discussion Papers 1388, C.E.P.R. Discussion Papers.
  3. Kenneth Rogoff, 1987. "Equilibrium Political Budget Cycles," NBER Working Papers 2428, National Bureau of Economic Research, Inc.
  4. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Governance matters," Policy Research Working Paper Series 2196, The World Bank.
  5. Torsten Persson & Gerard Roland & Guido Tabellini, . "Separation of Powers and Political Accountability," Working Papers 100, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
  7. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  8. David Dreyer Lassen, 2000. "Political Accountability and the Size of Government: Theory and Cross-Country Evidence," EPRU Working Paper Series 00-20, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  9. Tanzi,Vito & Schuknecht,Ludger, 2000. "Public Spending in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521662918, November.
  10. Stephen L. Parente & Edward C. Prescott, 2002. "Barriers to Riches," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661306, December.
  11. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
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