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Why do Policy Makers Stick to Inefficient Decisions?

Abstract

This paper offers an explanation forwhy policy makers stick to inefficient policydecisions. I argue that repealing a policy is a badsignal to voters about the policy maker's competenceif voters do not have complete knowledge about theeffects of implemented policies. I derive the optimalpolicy maker's decision on continuation of a policy,assuming that voters' beliefs about the policy maker'scompetence are updated according to Bayes' rule. Ishow that if the policy maker cares sufficiently aboutreelection, he will never repeal a policy.

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Dur, R.A. Why do Policy Makers Stick to Inefficient Decisions?. Public Choice 107, 221–234 (2001). https://doi.org/10.1023/A:1010305204751

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Keywords

  • Policy Maker
  • Public Finance
  • Complete Knowledge
  • Competenceif Voter