Transparency and Economic Policy
29 Pages Posted: 3 Aug 2005 Last revised: 19 Aug 2008
Date Written: August 18, 2008
Abstract
We provide a multiperiod model of political competition in which voters imperfectly observe the electoral promises made to other voters. Imperfect observability generates an incentive for candidates to offer excessive transfers even if voters are homogeneous and taxation is distortionary. Government spending is larger than in a world of perfect observability. Transfers are partly financed through government debt, and the size of the debt is higher in less transparent political systems. The model provides an explanation of fiscal churning; it also predicts that groups whose transfers are less visible to others receive higher transfers, and that imperfect transparency of transfers may lead to underprovision of public goods. From the policy perspective, the main novelty of our analysis is a separate evaluation of the transparency of spending and the transparency of revenues. We show that the transparency of the political system does not unambigously improve efficiency: transparency of spending is beneficial, but transparency of revenues can be counterproductive because it endogenously leads to increased wasteful spending.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
A Political Economy Model of Congressional Careers
By Daniel Diermeier, Michael P. Keane, ...
-
By Francesco Caselli and Massimo Morelli
-
A Political Economy Model of Congressional Careers, Second Version
By Daniel Diermeier, Michael P. Keane, ...
-
A Political Economy Model of Congressional Careers: Supplementary Material
By Daniel Diermeier, Michael P. Keane, ...
-
Mixed Equilibrium in a Downsian Model with a Favored Candidate
-
By Matthias Messner and Mattias Polborn
-
Political Careers or Career Politicians?
By Andrea Mattozzi and Antonio Merlo
-
Political Careers or Career Politicians?
By Andrea Mattozzi and Antonio Merlo
-
Political Careers or Career Politicians?
By Andrea Mattozzi and Antonio Merlo
-
Political Careers Or Career Politicians? Second Version
By Andrea Mattozzi and Antonio Merlo