W . ALLEN WALLIS Institute of POLITICAL ECONOMY UNIVERSITY OF ROCHESTER A Reputational
نویسندگان
چکیده
We study a dynamic game of incomplete information in which two political parties contest elections with endogenously formed reputations regarding the preferences that prevail within each party. Party preferences exhibit serial correlation and change with higher probability following defeat in elections. We show that when partisans care sufficiently about office, extreme policies are pursued with positive probability by the government if the ruling party is perceived relatively more extreme than the opposition. In equilibrium such policies occur when (a) both parties are perceived to be more extreme than a fixed benchmark level, and (b) elections are close in that both parties have similar reputations. Two qualitatively different equilibrium dynamics are possible depending on the relative speed with which preferences of parties in government or in the opposition change: One produces regular government turnover and extreme policies along the path of play, another involves a strong incumbency advantage and policy moderation.
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Eric Hanushek is a Professor of Economics and Public Policy and Director of the W. Allen Wallis Institute of Political Economy at the University of Rochester. He joined the University of Rochester in 1978 and has previously been Director of the university's Public Policy Analysis Program and Chairman of the Department of Economics. From 1983–85, he was Deputy Director of the Congressional Budge...
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