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

Hortala-Vallve, Rafael and Larcinese, Valentino (2017) The perverse consequences of policy restrictions in the presence of asymmetric information. Political Science Research and Methods. pp. 1-15. ISSN 2049-8470

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Identification Number: 10.1017/psrm.2016.30

Abstract

Institutions have the power to limit a government’s policy options. Policy restrictions are often used as solutions to coordination failures or time inconsistency problems. However, policy constraints can have significant drawbacks and these disadvantages have, to date, been overlooked in the literature. When institutional constraints tie a government’s hands, citizens will have less incentive to become informed about politics and participate in collective decision-making. This is because policy restrictions lower the private returns of political information. A fiscal policy restriction, for example, may decrease redistribution by lowering a poorer voters’ acquisition of political information. We illustrate our theoretical findings with numerical simulations and find that in one in three cases these policy restrictions make poorer voters worse off.

Item Type: Article
Official URL: http://journals.cambridge.org/action/displayJourna...
Divisions: Government
Subjects: J Political Science > JA Political science (General)
Sets: Departments > Government
Date Deposited: 18 Aug 2016 14:58
Last Modified: 17 Mar 2020 00:07
URI: http://eprints.lse.ac.uk/id/eprint/67505

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