Loss Aversion in Politics

Alberto Alesina and Francesco Passarelli

No 21077, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study loss aversion in majority voting. First, we show a status quo bias. Second, loss aversion implies a moderating effect. Third, in a dynamic setting, the effect of loss aversion diminishes with the length of the planning horizon of voters; however, in the presence of a projection bias, majorities are partially unable to understand how fast they will adapt. Fourth, in a stochastic environment, loss aversion yields a significant distaste for risk, but also a smaller attachment to the status quo. The application of these results to a model of redistribution leads to empirically plausible implications.

JEL-codes: H0 (search for similar items in EconPapers)
Date: 2015-04
New Economics Papers: this item is included in nep-cdm, nep-mic and nep-pol
Note: POL
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

Published as Alberto Alesina & Francesco Passarelli, 2019. "Loss Aversion in Politics," American Journal of Political Science, vol 63(4), pages 936-947.

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