Inattentive Voters and Welfare-State Persistence

Christian Bredemeier

No 214, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Welfare-state measures often tend to persist even when they seem to have become suboptimal due to changes in the economic environment. This paper proposes an information-based explanation for the persistence of the welfare state. I present a structural model where rationally inattentive voters decide upon implementations and removals of social insurance. In this model, welfare-state persistence arises from disincentive effects of social insurance on attentiveness. The welfare state crowds out private financial precautions and with it agents' attentiveness to changes in economic fundamentals. When welfare-state arrangements are pronounced, agents realize changes in economic fundamentals later and reforms have considerable delays.

Keywords: welfare state; voting; imperfect information (search for similar items in EconPapers)
JEL-codes: D72 D83 H55 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:214

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