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Government Policy with Time Inconsistent Voters

  • Leeat Yariv

    (California Institute of Technology)

  • Alessandro Lizzeri

    (New York University)

  • Alberto Bisin

    (New York University)

Behavioral economics presents a "paternalistic" rationale for government intervention. Current literature focuses on benevolent government. This paper introduces politicians who may indulge/exploit these behavioral biases. We present an analysis of the novel features that arise when the political process is populated by voters who may be time inconsistent, a' la Phelps and Polak (1968) and Laibson (1997). Time inconsistent voters exhibit demand for commitment. We show that electorally accountable politicians may choose policies that interfere with individuals' desire to commit, and that government may not be very effective in satisfying the demand for commitment.

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File URL: https://economicdynamics.org/meetpapers/2012/paper_92.pdf
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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 92.

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Date of creation: 2012
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Handle: RePEc:red:sed012:92
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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  1. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  2. Marco Battaglini & Stephen Coate, 2007. "A Dynamic Theory of Public Spending, Taxation and Debt," Discussion Papers 1441, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  7. Shlomo Benartzi & Richard Thaler, 2004. "Save more tomorrow: Using behavioral economics to increase employee saving," Natural Field Experiments 00337, The Field Experiments Website.
  8. Krusell, Per & Kuruscu, Burhanettin & Smith, Anthony Jr., 2002. "Equilibrium Welfare and Government Policy with Quasi-geometric Discounting," Journal of Economic Theory, Elsevier, vol. 105(1), pages 42-72, July.
  9. Semyon MALAMUD & Fabio TROJANI, 2009. "Variance Covariance Orders and Median Preserving," Swiss Finance Institute Research Paper Series 09-13, Swiss Finance Institute.
  10. Faruk Gul & Wolfgang Pesendorfer, 2004. "Self-Control and the Theory of Consumption," Econometrica, Econometric Society, vol. 72(1), pages 119-158, 01.
  11. Jeremy Tobacman & David Laibson, 2007. "Estimating Discount Functions with Consumption Choices over the Lifecycle," Economics Series Working Papers 341, University of Oxford, Department of Economics.
  12. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  13. Cukierman, Alex & Meltzer, Allan H, 1989. "A Political Theory of Government Debt and Deficits in a Neo-Ricardian Framework," American Economic Review, American Economic Association, vol. 79(4), pages 713-32, September.
  14. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February.
  15. Bryan Caplan, 2007. "Introduction to The Myth of the Rational Voter: Why Democracies Choose Bad Policies," Introductory Chapters, in: The Myth of the Rational Voter: Why Democracies Choose Bad Policies Princeton University Press.
  16. Robert J. Barro, 1999. "Ramsey Meets Laibson in the Neoclassical Growth Model," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1125-1152.
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