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Stéphane Wolton, LSE Print
Tuesday, 20 October 2015, 14:00 - 15:15

Stéphane Wolton, London School of Economics

Rational Ignorance, Elections, and Reform

Abstract : Why are beneficial economic reforms rarely adopted? This paper shows that, paradoxically, a high demand for reform by voters can explain this puzzle. We analyze a model of election with a cognitively constrained voter who must pay costly attention to the campaign to learn candidates' platforms. We find that when the voter's demand for reform is high, the electoral process risks becoming over-responsive: Candidates promise reforms despite their inability to carry-out welfare-improving policy changes. The voter must then choose between potentially harmful reforms or no reform, and prefers the second option whenever the welfare cost of poorly executed reforms is too large. Our results help organize the mixed evidence on the impact of crises on the likelihood of reform.

 

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