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Read my lips: the political economy of information transmission

Author

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  • Tim Besley

    () (Institute for Fiscal Studies and London School of Economics)

  • Rohini Pande

    (Institute for Fiscal Studies)

Abstract

The paper studies credible information transmission by governments. A group of heterogenous individuals have to make private investment and labor supply decisions while relying on the government for information about investment returns. The government consists of a an elected citizen who chooses a redistributive strategy in addition to providing information. We give conditions under which the outcome leads to over- or under-investment in high return activities and the outcome is Pareto efficient.

Suggested Citation

  • Tim Besley & Rohini Pande, 1998. "Read my lips: the political economy of information transmission," IFS Working Papers W98/13, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:98/13
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    References listed on IDEAS

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    1. Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 85-114.
    2. Feddersen, Timothy J & Pesendorfer, Wolfgang, 1996. "The Swing Voter's Curse," American Economic Review, American Economic Association, vol. 86(3), pages 408-424, June.
    3. Steven A. Matthews, 1989. "Veto Threats: Rhetoric in a Bargaining Game," The Quarterly Journal of Economics, Oxford University Press, vol. 104(2), pages 347-369.
    4. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
    5. Martin J. Osborne & Al Slivinski, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 65-96.
    6. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-1235, December.
    7. Abhijit Banerjee & Rohini Somanathan, 2001. "A Simple Model of Voice," The Quarterly Journal of Economics, Oxford University Press, vol. 116(1), pages 189-227.
    8. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
    9. 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 914-927, October.
    10. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
    11. Stein, Jeremy C, 1989. "Cheap Talk and the Fed: A Theory of Imprecise Policy Announcements," American Economic Review, American Economic Association, vol. 79(1), pages 32-42, March.
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    Cited by:

    1. Lagunoff, Roger, 2006. "Credible communication in dynastic government," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 59-86, January.
    2. Heidhues, Paul & Lagerlof, Johan, 2003. "Hiding information in electoral competition," Games and Economic Behavior, Elsevier, vol. 42(1), pages 48-74, January.

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H10 - Public Economics - - Structure and Scope of Government - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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