Policy Making with Reputation Concerns

Qiang Fu and Ming Li

Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ

Abstract: We study the policy choice of an incumbent politician who is concerned with the public's perception of his capability. The politician decides whether to maintain the status quo or to conduct a risky reform. The success of the reform critically depends on the ability of the politician in office, which is privately known to the politician. The public observes both his policy choice and the outcome of the reform, and forms a posterior on the true ability of the politician. We show that politicians may engage in socially detrimental reform in order to be perceived as more capable. Conservative institutions that thwart reform may potentially improve social welfare.

Keywords: Reform; Reputation; Ability; Conservatism (search for similar items in EconPapers)
JEL-codes: C72 D72 D82 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010
New Economics Papers: this item is included in nep-hpe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montec:09-2010

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