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Policy Reform Under Electoral Uncertainty

  • Dalibor Eterovic

How does uncertainty affect the process of policy reform? Our investigation identifies two types of uncertainties, one at the electoral level and another at the implementation level. When voters abstain from the electoral process, electoral uncertainty emerges. Implementation uncertainty arises whenever the politician is unable to guarantee a positive outcome from a policy implementation. Using a political agency model where two groups of voters delegate to a politician the decision to implement reform or maintain the status quo of the economy, we show that both implementation uncertainty and electoral uncertainty affect policy implementation in different ways. Implementation uncertainty might introduce disagreement between voters about the (ex-ante) convenience of implementing the project. On the other hand, with electoral uncertainty in the political system, political power may be detached from the group’s relative size, thus linking it to the citizens’ probability of being the decisive vote. In short, a highly disciplined minority group could gather enough political power to impose their preferred policies over a less disciplined majority group.

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Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 546.

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Date of creation: Dec 2009
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Handle: RePEc:chb:bcchwp:546
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  1. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
  2. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
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  4. Alberto Chong & Mauricio Olivera, 2008. "Does Compulsory Voting Help Equalize Incomes?," Economics and Politics, Wiley Blackwell, vol. 20(3), pages 391-415, November.
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  6. Rodrik, Dani, 1989. "Promises, Promises: Credible Policy Reform via Signalling," Economic Journal, Royal Economic Society, vol. 99(397), pages 756-72, September.
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  8. Stephen Morris, 2001. "Political Correctness," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 231-265, April.
  9. Dani Rodrik, 1989. "Policy Uncertainty and Private Investment in Developing Countries," NBER Working Papers 2999, National Bureau of Economic Research, Inc.
  10. Dixit, Avinash & Grossman, Gene M. & Helpman, Elhanan, 1997. "Common Agency and Coordination: General Theory and Application to Government Policy Making," Scholarly Articles 3450061, Harvard University Department of Economics.
  11. Stephen Morris & Stephen Coate, 1999. "Policy Persistence," American Economic Review, American Economic Association, vol. 89(5), pages 1327-1336, December.
  12. Sanjay Jain & Sharun W. Mukand, 2003. "Redistributive Promises and the Adoption of Economic Reform," American Economic Review, American Economic Association, vol. 93(1), pages 256-264, March.
  13. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
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