Voters’ commitment problem and reforms in welfare programs
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- Hollanders, D. & Vis, B. Public Choice (2013) 155: 433. doi:10.1007/s11127-011-9872-1
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When will a vote-seeking government pursue unpopular welfare reforms that are likely to cost it votes? Using a game-theoretical model, we show that a government enacts reforms that are unpopular with the median voter during bad economic times, but not during good ones. The key reason is that voters cannot commit to re-elect a government that does not reform during bad times. This voters’ commitment problem stems from economic voting, i.e., voters’ tendency to punish the government for a poorly performing economy. The voter commitment problem provides an explanation for the empirical puzzle that governments sometimes enact reforms that voters oppose.