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Good Politicians' Distorted Incentives

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  • Margherita Negri

    (School of Economics and Finance, University of St Andrews)

Abstract

I construct a political agency model that provides a new explanation for sub-optimal policy making decisions by incumbents. I show that electoral incentives can induce politicians to address less relevant issues, disregarding more important ones. Issue importance is defined in terms of the utility voters would receive if the issue was solved. Contrary to existing literature, sub-optimal policy making occurs even when voters are perfectly informed about issues’ characteristics and politicians are policy oriented. I provide an explanation that relies on the negative correlation between issue importance and probability of solving it: for a given effort exerted by incumbents, less relevant issues guarantee higher probability of success. In equilibrium, voters cannot commit to re-elect the incumbent if and only if the most important issue was solved. This is because solving the easy issue also constitutes a positive signal about incumbents’ type. Whenever re-election is sufficiently valuable, then, politicians will choose to address less relevant and easier issues.

Suggested Citation

  • Margherita Negri, 2017. "Good Politicians' Distorted Incentives," Discussion Paper Series, School of Economics and Finance 201713, School of Economics and Finance, University of St Andrews.
  • Handle: RePEc:san:wpecon:1713
    as

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    File URL: http://www.st-andrews.ac.uk/~wwwecon/repecfiles/4/1713.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    political agency; elections; incumbent behavior; politicians’ incentives;
    All these keywords.

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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