A Reform Dilemma in Polarized Democracies

Working Paper 16/255

84 Pages Posted: 5 Aug 2016

See all articles by Hans Gersbach

Hans Gersbach

ETH Zurich - CER-ETH -Center of Economic Reseaarch; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Oriol Tejada

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Date Written: August 4, 2016

Abstract

We study the feasibility and efficiency of policy reforms in polarized democracies. We develop a simple election model where (i) reforms are costly for voters and politicians and these costs increase with the extent of policy change, and (ii) politicians differ in their ability to carry out reforms efficiently. We identify a so-called Reform Dilemma, which manifests itself in two variants. From a static perspective, low-reform-ability politicians may be elected, who impose high costs on citizens for each reform step. From a dynamic perspective, incumbents may choose socially undesirable policies to align the social Need for reform with their own reform ability and are thus re-elected regardless of their Reform ability. In general, both manifestations of the Reform Dilemma are more pronounced when political parties’ positions are polarized. Furthermore, the existence of the Reform Dilemma is independent of the exact point in time when the abilities of candidates reveal themselves and become common knowledge.

Keywords: Elections, Democracy, Costs of Reform, Political Polarization

JEL Classification: D72, D82

Suggested Citation

Gersbach, Hans and Tejada, Oriol, A Reform Dilemma in Polarized Democracies (August 4, 2016). Working Paper 16/255 . Available at SSRN: https://ssrn.com/abstract=2818474 or http://dx.doi.org/10.2139/ssrn.2818474

Hans Gersbach (Contact Author)

ETH Zurich - CER-ETH -Center of Economic Reseaarch ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Oriol Tejada

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland
41446329693 (Phone)

HOME PAGE: http://www.cer.ethz.ch/mip/people/toriol

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