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Habit formation, strategic extremism, and debt policy


Matsen, Egil; Thøgersen, Øystein (2010). Habit formation, strategic extremism, and debt policy. Working paper series / Institute for Empirical Research in Economics No. 468, University of Zurich.

Abstract

We suggest a probabilistic voting model where voters’ preferences for alternative public goods display habit formation. Current policies determine habit levels and in turn the future preferences of the voters. This allows the incumbent to act strategically in order to influence the probability of reelection.nComparing to a benchmark case of a certain reelection, we demonstrate that the incumbent’s optimal policy features both a more polarized allocation between the alternative public goods and a debt bias.

Abstract

We suggest a probabilistic voting model where voters’ preferences for alternative public goods display habit formation. Current policies determine habit levels and in turn the future preferences of the voters. This allows the incumbent to act strategically in order to influence the probability of reelection.nComparing to a benchmark case of a certain reelection, we demonstrate that the incumbent’s optimal policy features both a more polarized allocation between the alternative public goods and a debt bias.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Institute for Empirical Research in Economics (former)
Dewey Decimal Classification:330 Economics
Language:English
Date:January 2010
Deposited On:29 Nov 2011 15:09
Last Modified:07 Dec 2017 09:59
Series Name:Working paper series / Institute for Empirical Research in Economics
ISSN:1424-0459
Official URL:http://www.econ.uzh.ch/wp.html

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