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The perverse consequences of policy restrictions in the presence of asymmetric information

Hortala-Vallve, Rafael, Larcinese, Valentino and Rickard, Stephanie (2013) The perverse consequences of policy restrictions in the presence of asymmetric information. Economic Organisation and Public Policy Discussion Papers (EOPP 048). The London School of Economics and Political Science, Suntory and Toyota International Centres for Economics and Related Disciplines, London, UK.

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Abstract

Institutions can limit governments' policy options. Such restrictions are usually commended as solutions to time inconsistency problems or coordination failures. However, policy constraints can have important drawbacks and these disadvantages have generally been overlooked to date. When institutional constraints tie the governments' hands, citizens have fewer incentives to be informed about politics and participate in collective decision making. In effect, policy restrictions lower the private returns from political information. A fiscal policy restriction, for example, may decrease redistribution by lowering poorer voters' acquisition of political information. We find support for our prediction in a controlled laboratory experiment.

Item Type: Monograph (Report)
Official URL: http://sticerd.lse.ac.uk/
Additional Information: © 2013 The Authors
Divisions: STICERD
Subjects: H Social Sciences > H Social Sciences (General)
Sets: Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Date Deposited: 24 Jul 2014 09:24
Last Modified: 20 Aug 2019 23:13
URI: http://eprints.lse.ac.uk/id/eprint/58203

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