 Policy experimentation, political competition, and heterogeneous beliefsAntony Millner, Hélène Ollivier and Leo Simon Journal of Public Economics, 2014, vol. 120, issue C, 84-96 Abstract: We consider a two period model in which an incumbent political party chooses the level of a current policy variable unilaterally, but faces competition from a political opponent in the future. Both parties care about voters' payoffs, but they have different beliefs about how policy choices will map into future economic outcomes. We show that when the incumbent party can endogenously influence whether learning occurs through its policy choices (policy experimentation), future political competition gives it a new incentive to distort its policies — it manipulates them so as to reduce uncertainty and disagreement in the future, thus avoiding facing competitive elections with an opponent very different from itself. The model thus demonstrates that all incumbents can find it optimal to ‘over experiment’, relative to a counterfactual in which they are sure to be in power in both periods. We thus identify an incentive for strategic policy manipulation that does not depend on parties having conflicting objectives, but rather stems from their differing beliefs about the consequences of their actions. Keywords: Beliefs; Learning; Political economy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:120:y:2014:i:c:p:84-96 DOI: 10.1016/j.jpubeco.2014.08.008 Access Statistics for this article Journal of Public Economics is currently edited by R. Boadway and J. Poterba More articles in Journal of Public Economics from Elsevier |
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