Reputation-Concerned Policy Makers and Institution Design

43 Pages Posted: 31 May 2011 Last revised: 15 Aug 2018

See all articles by Qiang Fu

Qiang Fu

National University of Singapore (NUS)

Ming Li

Concordia University; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Date Written: May 8, 2010

Abstract

We study the policy choice of an office-holding politician who is concerned with the public’s perception of his capabilities. The politician decides whether to maintain the status quo or to conduct a risky reform. The success of the reform depends critically upon the capability of the politician, which is privately known to the politician. The public observes both his policy choice and the outcome of the reform, and assesses the politician’s competence. We show that politicians may engage in socially detrimental reform in order to be perceived as more capable. We investigate the institutional remedy that balances the gains and costs when the policy maker is subject to reputation concerns. Conservative institutions that thwart reform may potentially improve social welfare.

Keywords: C72, D72, D82

JEL Classification: Reform, Reputation, Ability, Conservatism

Suggested Citation

Fu, Qiang and Li, Ming, Reputation-Concerned Policy Makers and Institution Design (May 8, 2010). Available at SSRN: https://ssrn.com/abstract=1602802 or http://dx.doi.org/10.2139/ssrn.1602802

Qiang Fu

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

Ming Li (Contact Author)

Concordia University ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1MB
Canada

HOME PAGE: http://alcor.concordia.ca/~mingli

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

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