The Reform Dilemma in Polarized Democracies

78 Pages Posted: 5 Feb 2018

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: February 2018

Abstract

We study the feasibility and efficiency of policy reforms in 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 are elected when political parties are polarized, who then impose high costs on citizens for each reform step. This property of elections arises as low reform ability is a substitute for policy commitment. 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.

Keywords: costs of reform, democracy, elections, political polarization.

JEL Classification: D72, D82

Suggested Citation

Gersbach, Hans and Tejada, Oriol, The Reform Dilemma in Polarized Democracies (February 2018). CEPR Discussion Paper No. DP12673. Available at SSRN: https://ssrn.com/abstract=3118321

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

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
97
PlumX Metrics