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Policy Choices by an Incumbent - A Case with Down-Up Problem, Bias Beliefs and Retrospective Voting

  • Carlos Seixas

    ()

    (Faculty of Economics, University of Porto, and CEF.UP)

  • António Brandão

    ()

    (Faculty of Economics, University of Porto, and CEF.UP)

  • Manuel Luís Costa

    ()

    (Faculty of Economics, University of Porto, and CEF.UP)

The main question addressed in the model regards which type of incentives an elected politician has to choose good or bad policies. In order to answer it, we focus on two inefficiencies, recently considered in the literature: the down-up problem and voters having bias beliefs and voting retrospectively. Moreover, we consider that the politician receives utility from holding office and from the success of his projects and, as to his policy platform choice; he can choose any combination of bad (yet popular) policies and good (yet less popular) policies. We are able to show that politicians can choose good long term policy platforms even when those policies have bad short term results. Motivation regarding the success of the projects or an incumbent bias tends to induce the politician to implement a good policy. Unclear responsibilities or campaign promises will have mixed effects on the type of policy implemented.

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File URL: http://www.fep.up.pt/investigacao/workingpapers/wp485.pdf
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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 485.

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Length: 25 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:por:fepwps:485
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  1. Rebecca Morton & Charles Cameron, 1992. "Elections And The Theory Of Campaign Contributions: A Survey And Critical Analysis," Economics and Politics, Wiley Blackwell, vol. 4(1), pages 79-108, 03.
  2. Enriqueta Aragonès & Thomas Palfrey & Andrew Postlewaite, 2007. "Political Reputations and Campaign Promises," Journal of the European Economic Association, MIT Press, vol. 5(4), pages 846-884, 06.
  3. Hans Gersbach, 2001. "Competition of Politicians for Incentive Contracts and Elections," CESifo Working Paper Series 406, CESifo Group Munich.
  4. Andrew Leigh, 2004. "Does the World Economy Swing National Elections?," CEPR Discussion Papers 485, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  5. Leiser, David & Drori, Shelly, 2005. "NaIve understanding of inflation," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 34(2), pages 179-198, March.
  6. Bryan Caplan, 2007. "Introduction to The Myth of the Rational Voter: Why Democracies Choose Bad Policies
    [The Myth of the Rational Voter: Why Democracies Choose Bad Policies]
    ," Introductory Chapters, Princeton University Press.
  7. Sven Jari Stehn & Annalisa Fedelino, 2009. "Fiscal Incentive Effects of the German Equalization System," IMF Working Papers 09/124, International Monetary Fund.
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