Democracies and Inefficiency

S. A. Baba

Economics and Politics, 1997, vol. 9, issue 2, 99-114

Abstract: A government‐interest group model is presented. Voters are neither always rationally ignorant nor always fully informed. Voters' information is variable. Unlike other models that assume a vote production function, this model considers the voter's utility and shows how rational voters with limited information can sometimes vote for inefficient policies. If voters can be informed inexpensively, then democracies are efficient. If the cost of informing voters is prohibitive, then pressure groups efficiently extract rent. If the cost of informing voters is low for efficient direct handouts, but high for inefficient policies, then inefficient redistributions will occur.

Date: 1997
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