Policy Reversal

Espen Moen () and Christian Riis ()

American Economic Review, 2010, vol. 100, issue 3, 1261-68

Abstract: We analyze the existence of policy reversal, the phenomenon sometimes observed that a certain policy (say extreme left-wing) is implemented by the "unlikely" (right-wing) party. We formulate a Downsian signaling model where the incumbent government, through its choice of policy, reveals information both regarding own preferences and external circumstances that may call for a particular policy. We show that policy reversal may indeed exist as an equilibrium phenomenon. This is partly because the incumbent party has superior opportunities to reveal information, and partly because its reputation protects a left-wing incumbent when advertising a right-wing policy.

JEL-codes: D72 D82 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/aer.100.3.1261
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Citations: View citations in EconPapers (1)

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