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Why Do Policy Makers Stick to Inefficient Decisions?

  • Robert A.J. Dur

    (Tinbergen Institute, Erasmus University Rotterdam)

This paper offers an explanation for why policy makers stick to inefficient policy decisions. I argue that repealing a policy is a bad signal to voters about the policy maker's competence if voters do not have complete knowledge about the effects of implemented policies. I derive the optimal policy maker's decision on continuation of a policy, assuming that voters' beliefs about the policy maker's competence are updated according to Bayes' rule. I show that if the policy maker cares sufficiently about reelection, he will never repeal a policy.

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Paper provided by EconWPA in its series Public Economics with number 9906002.

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Length: 21 pages
Date of creation: 18 Jun 1999
Date of revision:
Handle: RePEc:wpa:wuwppe:9906002
Note: Type of Document - ; pages: 21; figures: none.
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  1. Swank, Otto H., 1998. "Towards an economic theory of party ideology," European Journal of Political Economy, Elsevier, vol. 14(2), pages 223-240, May.
  2. Rogoff, Kenneth, 1990. "Equilibrium Political Budget Cycles," American Economic Review, American Economic Association, vol. 80(1), pages 21-36, March.
  3. Glazer, Amihai & Hassin, Refael, 1994. "Governmental Failures in Evaluating Programs," University of California Transportation Center, Working Papers qt4jd2q25f, University of California Transportation Center.
  4. Schultz, Christian, 1996. "Polarization and Inefficient Policies," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 331-44, April.
  5. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc.
  6. Wirl, Franz, 1991. " The Political Economics of Wackersdorf: Why Do Politicians Stick to Their Past Decisions?," Public Choice, Springer, vol. 70(3), pages 343-50, June.
  7. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
  8. Cukierman, Alex & Alesina, Alberto, 1990. "The Politics of Ambiguity," Scholarly Articles 4552530, Harvard University Department of Economics.
  9. Glazer, A. & Grofman, B., 1988. "Why Representatives Are Ideologists Though Voters Are Not," Papers 88-04, California Irvine - School of Social Sciences.
  10. Howitt, Peter & Wintrobe, Ronald, 1995. "The political economy of inaction," Journal of Public Economics, Elsevier, vol. 56(3), pages 329-353, March.
  11. Harrington, Joseph E, Jr, 1993. "Economic Policy, Economic Performance, and Elections," American Economic Review, American Economic Association, vol. 83(1), pages 27-42, March.
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