Rational inattention and politics: how parties use fiscal policies to manipulate voters

Samuele Murtinu, Giulio Piccirilli () and Agnese Sacchi
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Giulio Piccirilli: Universitas Mercatorum

Public Choice, 2022, vol. 190, issue 3, No 8, 365-386

Abstract: Abstract We model a two-party electoral game with rationally inattentive voters. Parties are endowed with different administrative competencies and announce a fiscal platform to be credibly implemented in case of electoral success. The budgetary impact of each platform depends on the party’s competence and on a stochastic implementation shock. Voters rely on the announced platform to infer a party’s unobserved competence. In addition, voters receive noisy signals on the impact of each fiscal platform with noise depending ultimately on a voter’s cognitive skills. We predict that the interplay between the desire of parties to win the election (the incentive to manipulate voters’ beliefs) and voters’ (lack of) cognitive skills (the scope for manipulation) distorts fiscal policies towards excessive budget deficits. The mechanism is that parties attempt to manipulate inferences on their competencies by implementing a loose fiscal policy. The predictions are tested empirically on a sample of advanced economies over years 1999–2008. Our results remain stable after controlling for potentially confounding differences across countries and over time, along with unobserved heterogeneity. Finally, alternative mechanisms potentially driving our results are investigated and ruled out.

Keywords: Rational inattention; Government polarization; Asymmetric information; Voter manipulation; Cognitive skills; Fiscal policy (search for similar items in EconPapers)
JEL-codes: D72 D83 E62 H62 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11127-021-00940-8

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