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Institutional Bias Towards The Status Quo

  • Dalibor Eterovic

Some societies appear to be better equipped than others to implement efficiency enhancing policy reforms and to deliver positive results out of their implementation. Our model presents an under-examined element of policy reform and institutional quality, showing how the characteristics of the political system may render citizens unable to properly reward politicians who implement new projects, thus favoring politicians who secure the status quo, albeit mediocre, of the economy. In such an environment, new policy projects are sidelined and political institutional quality remains inert. Political institutions matter because they affect the value for the politicians of staying in office. We show that societies with a suboptimal political system may present institutional bias towards the status quo. This bias arises due to the inability of the citizens to design an effective voting rule that induces politicians to implement new projects successfully.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 543.

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Date of creation: Dec 2009
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Handle: RePEc:chb:bcchwp:543
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