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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. Mukand, Sharun & Rodrik, Dani, 2002. "In Search of the Holy Grail: Policy Convergence, Experimentation and Economic Performance," Working Paper Series rwp02-027, Harvard University, John F. Kennedy School of Government.
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  7. Tim Willems, 2013. "Actively Learning by Pricing: A Model of an Experimenting Seller," Economics Series Working Papers 687, University of Oxford, Department of Economics.
  8. Oriana Bandiera & Luigi Guiso & Andrea Prat & Raffaella Sadun, 2009. "Matching Firms, Managers and Incentives," Economics Working Papers ECO2009/14, European University Institute.
  9. Sumon Majumdar & Sharun W. Mukand, 2004. "Policy Gambles," Discussion Papers Series, Department of Economics, Tufts University 0407, Department of Economics, Tufts University.
  10. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
  11. Chambers, Christopher P. & Echenique, Federico, 2012. "When does aggregation reduce risk aversion?," Games and Economic Behavior, Elsevier, vol. 76(2), pages 582-595.
  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. Zwiebel, Jeffrey, 1995. "Corporate Conservatism and Relative Compensation," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 1-25, February.
  14. 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.
  15. 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.
  16. 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.
  17. Steven Callander & Bård Harstad, 2013. "Experimentation in Federal Systems," NBER Working Papers 19601, National Bureau of Economic Research, Inc.
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