Policy Makers, Advisors, and Reputation

Phongthorn Wrasai () and Otto Swank ()
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Phongthorn Wrasai: Department of Economics, Erasmus Universiteit Rotterdam

No 04-037/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This discussion paper resulted in an article in the 'Journal of Economic Behavior and Organization' (2007). Volume 62, pages 579-590.

When hiring an adviser (he), a policy maker (she) often faces the problem that she has incomplete information about his preferences. Some advisers are good, in the sense that their preferences are closely aligned to the policy maker's preferences, and some advisers are bad. Recently, some scholars have argued that the policy maker's power to replace her adviser induces the adviser to act more in line with the policy maker's interests. The idea is that the adviser's desire to put a stamp on future policy reduces his incentive to manipulate information. This paper shows that the policy maker's power to replace her adviser may harm her. The reason is that this power may have an adverse effect on the behavior of good advisers.

Keywords: Reputation; Signalling; Uncertainty; Policy decision-making (search for similar items in EconPapers)
JEL-codes: D78 D82 D83 (search for similar items in EconPapers)
Date: 2004-03-30, Revised 2004-12-09
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Journal Article: Policy makers, advisers, and reputation (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20040037

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