Reputation-concerned policy makers and institutional status quo bias

Qiang Fu and Ming Li

Journal of Public Economics, 2014, vol. 110, issue C, 15-25

Abstract: We study the policy choice of an office-holding politician who is concerned with the public's perception of his capabilities. The politician decides whether to maintain the status quo or to conduct a risky reform. The reform's success depends critically on the politician's capabilities, which are privately known to the politician. The public observes both his policy choice and the outcome of the reform, and assesses his competence. We show that the politician may engage in socially detrimental reform in order to be perceived as more capable. We investigate the institutional remedy that balances the gains and costs when the policy maker is subject to reputation concerns. Conservative institutions that thwart beneficial 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)
Date: 2014
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:110:y:2014:i:c:p:15-25

DOI: 10.1016/j.jpubeco.2013.11.008

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