Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 1999-07-01
Number: 99-050/1
Author-Name: Robert A.J. Dur
Author-Email: dur@few.eur.nl
Author-Workplace-Name: Erasmus Universiteit Rotterdam
Title: Why do Policy Makers stick to Inefficient Decisions?
Abstract: 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.
File-Url: https://papers.tinbergen.nl/99050.pdf
File-Format: application/pdf
File-Size: 401408 bytes
Handle: RePEc:tin:wpaper:19990050