Voters' Commitment Problem and Reforms in Welfare Programs

34 Pages Posted: 14 Nov 2010

See all articles by David Hollanders

David Hollanders

Tilburg University - Center and Faculty of Economics and Business Administration

Barbara Vis

Utrecht University School of Governance

Date Written: September 1, 2010

Abstract

Under which conditions do vote-seeking governments pursue reforms in welfare programs that are unpopular among the median voter and that, consequently, likely lead to a loss of votes? This paper proposes reforms may result from a commitment problem of voters between elections. Due to economic voting voters cannot credibly commit to re-elect a non-reforming government during a recession. This study uses a game-theoretical model to investigate what happens when the median voter in a multi-period election game can no longer condition re-election perfectly on the actions of the incumbent government. The model shows that multiple equilibria may emerge, including one with the incumbent government reforming during bad economic circumstances and not reforming during good times. The voter commitment mechanism can hereby rationalize the theoretically puzzling empirical phenomenon that governments reform welfare programs amidst reform-averse voters. Our theoretical prediction that they do under economic lows is in line with existing empirical work.

Keywords: Commitment, Political Economy, Reform, Welfare-Programs

JEL Classification: D72, D78, H11, H5, I38, J48

Suggested Citation

Hollanders, David and Vis, Barbara, Voters' Commitment Problem and Reforms in Welfare Programs (September 1, 2010). Netspar Discussion Paper No. 09/2010-041. Available at SSRN: https://ssrn.com/abstract=1708029 or http://dx.doi.org/10.2139/ssrn.1708029

David Hollanders (Contact Author)

Tilburg University - Center and Faculty of Economics and Business Administration ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Barbara Vis

Utrecht University School of Governance ( email )

Bijlhouwerstraat 6
Utrecht, 3511 ZC
Netherlands

Register to save articles to
your library

Register

Paper statistics

Downloads
21
Abstract Views
298
PlumX Metrics