Voters and the trade-off between policy stability and responsiveness

Antoine Loeper and Wioletta Dziuda

Journal of Public Economics, 2024, vol. 232, issue C

Abstract: Policy making involves a trade-off between policy responsiveness to changing circumstances and policy stability. Little is known, however, about how this trade-off is resolved in representative democracies. Anecdotal evidence suggests that policies not only fail to respond efficiently to changing circumstances but also change unnecessarily with political turnover. We study this trade-off in a dynamic election model with a voter and two parties with distinct ideologies in which all players incur a common cost for changing the policy from one period to the next. Before elections, the voter observes the current policy as well as a signal about her policy preference for the next period. We show that, consistent with empirical evidence, a liberal (conservative) incumbent is more likely to be reelected after having implemented a liberal (conservative) policy. Expecting this electoral bias, the incumbent is less responsive to the state and instead tilts policy making towards its ideology. Hence, as compared to a world without electoral pressures, policies under-respond to real shocks and over-respond to political turnover. We study how the resulting inefficiencies vary with preference for stability, voter’s information, ideological polarization, and office motivation of the parties.

Keywords: Costly policy change; Policy stability; Policy responsiveness; Elections (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:232:y:2024:i:c:s004727272400029x

DOI: 10.1016/j.jpubeco.2024.105093

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