Government Policy with Time Inconsistent Voters

31 Pages Posted: 31 Jul 2012

See all articles by Alberto Bisin

Alberto Bisin

New York University (NYU) - Department of Economics; New York University (NYU) - Center for Experimental Social Science (CESS); National Bureau of Economic Research (NBER)

Alessandro Lizzeri

Princeton University - Department of Economics

Leeat Yariv

Princeton University

Date Written: September 27, 2011

Abstract

Behavioral economics presents a "paternalistic" rationale for government intervention. Current literature focuses on benevolent government. This paper introduces politicians who may indulge/exploit these behavioral biases. We present an analysis of the novel features that arise when the political process is populated by voters who may be time inconsistent, a' la Phelps and Polak (1968) and Laibson (1997). Time inconsistent voters exhibit demand for commitment. We show that electorally accountable politicians may choose policies that interfere with individuals' desire to commit, and that government may not be very effective in satisfying the demand for commitment.

Keywords: time inconsistency, behavioral political economy, nudge, public debt

JEL Classification: D02, D03, D72, H4, H6

Suggested Citation

Bisin, Alberto and Lizzeri, Alessandro and Yariv, Leeat, Government Policy with Time Inconsistent Voters (September 27, 2011). Available at SSRN: https://ssrn.com/abstract=2120954 or http://dx.doi.org/10.2139/ssrn.2120954

Alberto Bisin

New York University (NYU) - Department of Economics

14 West 4th Street
New York, NY 10012
United States

New York University (NYU) - Center for Experimental Social Science (CESS) ( email )

One Washington Place
New York, NY 10003
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Alessandro Lizzeri

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States
08544 (Fax)

Leeat Yariv (Contact Author)

Princeton University ( email )

Princeton, NJ 08544-1021
United States

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