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Political Accountability and Policy Experimentation: Why to Elect Left-Handed Politicians?

  • Tim Willems

In an environment where voters face an inference problem on the competence level of policy makers, this paper shows how subjecting these policy makers to reelection can reduce the degree of policy experimentation to the benefit of the status quo.� This may be a reason why some notable policy experiments were implemented by non-accountable regimes (cf. Chile and China).� Whether experimentation in representative democracies is suboptimally low, depends on society's degree of risk aversion relative to that of the decision maker.� If the level of experimentation is suboptimal, taking decisions by direct democracy, or electing risk-loving politicians could improve welfare.� Interestingly, risk-lovers also seem to be overrepresented among Presidents of various countries.

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File URL: http://www.economics.ox.ac.uk/materials/papers/12641/paper647.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 647.

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Date of creation: 07 Mar 2013
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Handle: RePEc:oxf:wpaper:647
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  1. Sharun W. Mukand & Dani Rodrik, 2005. "In Search of the Holy Grail: Policy Convergence, Experimentation, and Economic Performance," American Economic Review, American Economic Association, vol. 95(1), pages 374-383, March.
  2. Carlo Prato & Bruno Strulovici, 2010. "Direct Democracy, Political Delegation, and Responsibility Substitution," Discussion Papers 1515, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Olaf Hübler, 2012. "Are Tall People Less Risk Averse than Others?," SOEPpapers on Multidisciplinary Panel Data Research 457, DIW Berlin, The German Socio-Economic Panel (SOEP).
  4. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
  5. Nicola Persico & Andrew Postlewaite & Dan Silverman, 2003. "The Effect of Adolescent Experience on Labor Market Outcomes: The Case of Height," PIER Working Paper Archive 03-036, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  6. Philippe Jehiel, 1999. "Information Aggregation and Communication in Organizations," Management Science, INFORMS, vol. 45(5), pages 659-669, May.
  7. Steven Callander & Bård Harstad, 2013. "Experimentation in Federal Systems," NBER Working Papers 19601, National Bureau of Economic Research, Inc.
  8. Bandiera, Oriana & Guiso, Luigi & Prat, Andrea & Sadun, Raffaella, 2009. "Matching Firms, Managers, and Incentives," CEPR Discussion Papers 7207, C.E.P.R. Discussion Papers.
  9. Zwiebel, Jeffrey, 1995. "Corporate Conservatism and Relative Compensation," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 1-25, February.
  10. Sumon Majumdar & Sharun W. Mukand, 2004. "Policy Gambles," American Economic Review, American Economic Association, vol. 94(4), pages 1207-1222, September.
  11. Eric Maskin, 2003. "The Politician and the Judge: Accountability in Government," Theory workshop papers 505798000000000076, UCLA Department of Economics.
  12. Alex Cukierman & Yossi Spiegel, 2003. "When is the median voter paradigm a reasonable guide for policy choices in a representative democracy?," Economics and Politics, Wiley Blackwell, vol. 15(3), pages 247-284, November.
  13. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
  14. Arrow, Kenneth J & Lind, Robert C, 1970. "Uncertainty and the Evaluation of Public Investment Decisions," American Economic Review, American Economic Association, vol. 60(3), pages 364-78, June.
  15. Chambers, Christopher P. & Echenique, Federico, 2012. "When does aggregation reduce risk aversion?," Games and Economic Behavior, Elsevier, vol. 76(2), pages 582-595.
  16. Tim Willems, 2013. "Actively Learning by Pricing: A Model of an Experimenting Seller," Economics Series Working Papers 687, University of Oxford, Department of Economics.
  17. Beck, Gunter W. & Wieland, Volker, 2002. "Learning and control in a changing economic environment," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1359-1377, August.
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