Why do Policy Makers stick to Inefficient Decisions?
This paper offers an explanation for why policy makers stick to inefficient policy decisions. I argue that repealing a policy is a bad signal to voters about the policy maker's competence if voters do not have complete knowledge about the effects of implemented policies. I derive the optimal policy maker's decision on continuation of a policy, assuming that voters' beliefs about the policy maker's competence are updated according to Bayes' rule. I show that if the policy maker cares sufficiently about reelection, he will never repeal a policy.
|elections, policy reversal, reputation|
|Economic Models of Political Processes: Rent-Seeking, Elections, Legislatures, and Voting Behavior (jel D72), Positive Analysis of Policy-Making and Implementation (jel D78)|
|Tinbergen Institute Discussion Paper Series|
Dur, A.J. (1999). Why do Policy Makers stick to Inefficient Decisions? (No. TI 99-050/1). Tinbergen Institute Discussion Paper Series. Retrieved from http://hdl.handle.net/1765/7720