Habit formation, strategic extremism, and debt policy

Egil Matsen and Ï¿½ystein Th�gersen

No 468, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: We suggest a probabilistic voting model where voters� preferences for alternative public goods display habit formation. Current policies determine habit levels and in turn the future preferences of the voters. This allows the incumbent to act strategically in order to influence the probability of reelection. Comparing to a benchmark case of a certain reelection, we demonstrate that the incumbent�s optimal policy features both a more polarized allocation between the alternative public goods and a debt bias.

Keywords: Budget deficits; voting; extremism; habit formation (search for similar items in EconPapers)
JEL-codes: D72 D78 H62 (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-cdm and nep-pol
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Habit formation, strategic extremism, and debt policy (2010)
Working Paper: Habit Formation, Strategic Extremism and Debt Policy (2007)
Working Paper: Habit formation, strategic extremism and debt policy (2007)
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