Ex Post Inefficiency in a Political Agency Model

Georges Casamatta () and Caroline De Paoli

No 4275, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We extend the model of Schultz (1996) to a dynamic setting with no policy commitment. Two parties that compete for election must choose the level of provision of a public good as well as the tax payment needed to finance it. The cost of producing the good may be high or low and this information is not known to the voters. We show that there exists an equilibrium in which the party that does not want much of the public good use the inefficient (high cost) technology even though the efficient one is available. Using the low cost technology would, by informing the voters about the cost parameter, force it to produce an excessively high level of the good. Interestingly, this equilibrium is not symmetric, suggesting that a party with a strong taste for the public good is less likely to adopt a wasteful policy.

Keywords: Commitment; Dynamic electoral competition; Ratchet effect (search for similar items in EconPapers)
JEL-codes: D72 D82 H41 (search for similar items in EconPapers)
Date: 2004-02
New Economics Papers: this item is included in nep-pbe
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP4275 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:4275

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP4275

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().