Policy experimentation, political competition, and heterogeneous beliefs

Antony Millner, Hélène Ollivier and Leo Simon
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Antony Millner: LSE - London School of Economics and Political Science

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

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)
Date: 2014-12
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Citations: View citations in EconPapers (12)

Published in Journal of Public Economics, 2014, 120, pp.84-96. ⟨10.1016/j.jpubeco.2014.08.008⟩

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Related works:
Journal Article: Policy experimentation, political competition, and heterogeneous beliefs (2014)
Working Paper: Policy Experimentation, Political Competition, and Heterogeneous Beliefs (2014)
Working Paper: Policy experimentation, political competition, and heterogeneous beliefs (2014)
Working Paper: Policy experimentation, political competition and heterogeneous beliefs (2014)
Working Paper: Policy experimentation, political competition, and heterogeneous beliefs (2014)
Working Paper: Policy experimentation, political competition and heterogeneous beliefs (2014)
Working Paper: Policy experimentation, political competition, and heterogeneous beliefs (2014)
Working Paper: Policy experimentation, political competition, and heterogeneous beliefs (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-01308618

DOI: 10.1016/j.jpubeco.2014.08.008

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